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Clayman, et al. v. McLaughlin, et al. (Lawyers Weekly No. 12-125-17)

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COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT
CIVIL ACTION
NO. 1684CV2373
DEBORAH A. CLAYMAN, individually and as trustee, and RICHARD E.
MASTROCOLA, trustee1
Plaintiffs
vs.
JOHN T. McLAUGHLIN, et al.
Defendants
MEMORANDUM AND ORDER
ON DEFENDANTS’ MOTION TO DISMISS
The widow of a real estate entreprenuer sues several individuals and entities following the
death of her husband. The Second Amended Complaint (“SAC”) alleges breach of fiduciary
duty, aiding and abetting tortious acts, tortious interference with a contractual relationship and
conversion. To briefly summarize the SAC, the widow alleges at least three wrongful acts or
series of acts. First, she claims that the individual selected by her husband to be his executor
(personal representative) and trustee of his revocable trust, upon the husband’s death, breached
fiduciary duties to her as a beneficiary and co-trustee. Second, she alleges that the
brother/business partner of her husband schemed with the executor to diminish what she was to
receive under her husband’s estate planning documents. Third, she alleges that defendants are, to
this day, refusing to pay to her trust amounts owed after the sale of a property and are, thus,
converting those proceeds. Defendants’ move to dismiss arguing that the SAC fails to state a
claim upon which relief can be granted. To address the arguments, the stage must be set from the
1 Deborah A. Clayman and Richard E. Mastrocola are the trustees of Deborah’s Trust,
described herein.
facts as alleged in the SAC, including the documents attached or referenced in the SAC.
BACKGROUND
Deborah A. Clayman married Richard I. Clayman in 2005.2 In connection with their
marriage, Deborah and Richard entered into a Prenuptial Agreement dated October 13, 2005.
Subsequently, Richard executed a Will and a Revocable Trust on January 25, 2006. Richard’s
Will names defendant, John T. McLaughlin, as his executor (personal representative). Under the
Revocable Trust, McLaughlin is named as trustee. These instruments, read together, detail
Richard’s intent with respect to what Deborah should receive after Richard’s death.3
McLaughlin was a trusted friend of Richard’s. He is a lawyer and a partner in the
defendant law firm, Berluti McLaughlin & Kutchin, LLP.
A. Estate Plan Instruments
The relevant terms of the Prenuptial Agreement are the following. Richard’s interests in
nine real estate investments are defined as “Separate Property.” Richard’s interest in the real
estate project known as Revere Beach at Oak Island is defined as “Marital Property.” One of the
properties listed as Separate Property is Richard’s residence at 615 Revere Beach Boulevard,
Revere. With respect to that property, Richard expressly agrees that upon his death Deborah
shall be entitled to receive the Revere residence outright and free of encumbrances.
The Prenuptial Agreement also contains the following provision for the division of
Richard’s property after Richard’s death:
2 Mr. and Mrs. Clayman, as well as other Clayman family members, will be referred to
by their first names to avoid confusion.
3 All of these instruments are attached to the SAC and, thus, may be considered on a
motion to dismiss. Schaer v. Brandeis University, 432 Mass. 474, 477 (2000)
2
Deborah shall be entitled to receive the annual income from
property of an amount equal to Two Million Dollars ($ 2,000,000),
provided that such property shall be held in a Qualified Terminable
Interest Property Trust, as defined in § 2056 (b)(7) of the Internal
Revenue Code of 1986, as amended, for the sole benefit of
Deborah. The choice of the specific property to be held in trust for
Deborah shall be made in the sole discretion of the Executor of
Richard’s estate and Trustees of such Trusts. Deborah shall be
entitled to be a co-Trustee of such Trust, but shall have no
authority to make distributions of principal. Deborah shall be
entitled to receive income from such Trust at least as often as
quarterly.
Prenuptial Agreement, Article III, A, 3(c)(ii). Finally, the Prenuptial Agreement provides that if
either party breached any provision of the agreement, “the breaching party or his or her estate
shall indemnify the other party and make the other party whole as if no such breach had
taken place with respect to this Agreement.” Id. at III, C.
Richard’s Will makes explicit reference to the Prenuptial Agreement. The Will provides
that all of Richard’s interest in the Revere residence go to Deborah, free of any mortgages. All of
Richard’s Separate Property, other than the Revere home, is bequeathed to Richard’s Revocable
Trust. McLaughlin is appointed as Richard’s Executor. The Executor is given broad power and
discretion. Specifically, with respect to Richard’s interest in the real estate listed as Separate
Property, the Will provides that the Executor shall not be held liable for any action or omission,
except for willful default or bad faith, in retaining, selling or otherwise dealing with such interest.
Richard executed the Revocable Trust on the same day as his Will. The Revocable Trust
provides that upon Richard’s death, McLaughlin shall serve as trustee. The Revocable Trust is
the vehicle used to pour the assets of that trust into two subtrusts – – Deborah’s Trust and the
Family Trust. With respect to the subtrust called Deborah’s Trust, the Revocable Trust provides
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that “if property is held on the terms of Deborah’s Trust under paragraph 5, Deborah may serve
as a co-trustee of Deborah’s Trust.” Revocable Trust, § 9.1.
With respect to Deborah’s Trust the Revocable Trust provides as follows:
My trustee shall set aside the sum of Two Million Dollars
($ 2,000,000) and deal with that sum under paragraph 5 as a
separate trust known as “Deborah’s Trust.” This provision is
intended to establish the Qualified Terminable Interest Property
Trust described in Article III, Paragraph A(3)(c)(ii) of the
Prenuptial Agreement and Deborah’s Trust is intended to satisfy
the requirements thereof.
Revocable Trust, § 4.1(b). The remaining property that flowed into the Revocable Trust from the
Will is, pursuant to the terms of the Revocable Trust, put into a subtrust called the Family Trust.
The beneficiary of the Family Trust is Kate Clayman, Richard’s daughter by a previous marriage.
Under §§ 5.1and 5.2 of the Revocable Trust describing Deborah’s Trust, Deborah is to
receive the income produced by the principal in Deborah’s Trust for her lifetime. Upon
Deborah’s death, after payment of estate taxes, the trustee is instructed to pay the principal into
the Family Trust. The trustee is given discretion to pay Deborah, during her lifetime, all or part of
the principal of Deborah’s Trust.
The Revocable Trust contains the following provision with respect to the trustee’s
discretion:
Whenever my trustee “may” pay income or principal to a
beneficiary or group of beneficiaries, my trustee shall have the
absolute discretion to make the payments at any time to one or
more of those beneficiaries, in any amounts and proportions and
for any purposes, except as specifically provided otherwise, as my
trustee considers advisable.
Revocable Trust, § 8.1.
4
Deborah was given the power to remove any trustee of Deborah’s Trust upon 30 days
notice. Under the terms of the Revocable Trust, each appointment, removal, resignation,
acceptance or notice regarding the trustees shall be in writing and shall be given to all of the
trustees.
Section 9.6 of the Revocable Trust recognizes that the subtrust may include assets that are
shares of stock or other ownership interests in closely held businesses. These interests are
defined as “Closely-Held Interests.” Section 9.7 describes the liability of a trustee for dealing
with Closely-Held Interests. Section 9.7(a) states that “[n]o trustee shall be liable for any action
or omission, except for willful default or bad faith, in retaining, selling or otherwise dealing with
an interest in the “Closely-Held Interests.” Section 9.10(b) of the Revocable Trust states that
“[a]ny account of the trustee of any trust under this agreement shall be conclusive, except for
fraud or manifest error, on all parties in interests, whether or not of full age or in being or in
being or ascertained, if assented to . . . by Deborah. . . .”
The Revocable Trust contains special provisions regarding Deborah’s Trust so as to
qualify it for the federal marital deduction from estate tax. The Trust expresses Richard’s intent
for the trustee to administer the property to qualify for the marital deduction and directs the
trustee to allocate property to Deborah’s Trust so as to constitute qualified terminable interest
property.4 In Section 11.1(c) the trustee is instructed that he “may purchase or retain property
that is unproductive of income in any trust under this agreement, except that my trustee shall
make any unproductive property in Deborah’s Trust productive or converted into productive
4 This provision is consistent with the Prenuptial Agreement where it referenced
Deborah’s entitlement to property to be held in a Qualified Terminable Interest Property Trust,
called a “Q-Tip” Trust.
5
property within a reasonable time after receiving a written request to do so from Deborah.”
B. After Richard’s Death
Richard died on May 1, 2013. McLaughlin was appointed as executor of Richard’s estate
and became trustee of the Revocable Trust. As executor, McLaughlin was charged to convey
Richard’s interest in the Revere residence to Deborah free of all encumbrances. As trustee,
McLaughlin was charged with allocating property in an amount equal to $ 2 million to Deborah’s
Trust in a manner to qualify for and be maintained as a Q-Tip Trust.
Claim for Reimbursement of Attorney’s Fees
According to the SAC, the first disagreement between Deborah and McLaughlin concerns
the conveyance of the Revere residence. In breach of the Prenuptial Agreement, Richard had,
during his life, conveyed an interest in the Revere residence to a third party. After Richard’s
death, McLaughlin, as executor, worked to recover from the third party the property interest in
the Revere residence and to convey the Revere residence to Deborah free and clear. Ultimately,
McLaughlin was successful. Deborah, however, had engaged her own attorney to advise her with
respect to obtaining her unencumbered interest in the Revere residence. Deborah requested that
McLaughlin, as executor, cause the estate to reimburse her for the fees that she incurred.
Deborah’s request was based upon the portion of the Prenuptial Agreement that expressly made
the estate of Richard liable to indemnify Deborah for any breach of the agreement and to make
her “whole as if no such breach had taken place . . . .” McLaughlin, however, refused to
indemnify Deborah. Deborah sues to recover from McLaughlin alleging that his refusal to
indemnify is a breach of fiduciary duty.
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Claims Arising from Allocation of Property to Deborah’s Trust
Under the terms of the Revocable Trust, McLaughlin was obligated to fund Deborah’s
Trust with property worth $ 2 million. According to the SAC, McLaughlin, on August 1, 2014,
conveyed minority interests in some of Richard’s Closely-Held Interests (i.e. LLC’s or other
entities owning interests in real estate projects). Although not mentioned explicitly in the SAC,
defendants attach to their motion papers a copy of McLaughlin’s July 31, 2014, letter to Deborah
that describes the transfers of property interests he intended to execute to fund Deborah’s Trust.
The next day, the property interests were transferred. Deborah then removed McLaughlin as a
trustee of Deborah’s Trust on November 25, 2014.
The SAC alleges that McLaughlin “willfully operated in bad faith by putting his own self
interest above the interests of Deborah to whom he owed a duty of loyalty” in connection with
allocating property interests to Deborah’s Trust. SAC, ¶ 119. In support of that assertion,
Deborah points to the following alleged facts. The Closely-Held Interests owned by Richard were
held, in most instances, in 50/50% ownership with Richard’s brother, Steven Clayman. “In the
summer of 2014 and no later than August 2014 and without the knowledge of Plaintiffs” Steven
and the Closely-Held Interests became clients of McLaughlin and his law firm. SAC ¶ 93.
McLaughlin consulted with Steven regarding what properties McLaughlin should select from the
Revocable Trust to fund Deborah’s Trust. Steven expressed to McLaughlin that, in his opinion,
Richard’s intent to provide $ 2 million worth of property to Deborah’s Trust was too generous. It
is alleged that McLaughlin followed Steven’s directions regarding the funding of Deborah’s
Trust. SAC ¶ 108.
Notwithstanding the provision in the Revocable Trust directing the trustee to deliver $ 2
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million to Deborah’s Trust in accordance with the Prenuptial Agreement, Article III, Paragraph A
(3)(c)(ii), whereby the “choice of specific property to be held in trust for Deborah shall be made
in the sole discretion of the Executor of Richard’s estate and Trustees [which would include
Deborah] of such Trusts” (emphasis added), McLaughlin unilaterally selected specific properties
in which he transferred only a portion of Richard’s interest to Deborah’s Trust. McLaughlin
failed to consult with Deborah before executing the allocation. McLaughlin did not obtain
Deborah’s consent to the choices of property. Instead, he presented the funding of Deborah’s
Trust to her on July 31, 2014, as a fait accompli. McLaughlin allegedly selected partial interests
in properties that would not produce significant income. In addition, by splitting Richard’s 50 %
interest between Deborah’s Trust and the Family Trust, the allocation guaranteed that the trusts
held minority positions with no ability to affect management decisions, including decisions to
produce income rather than to invest for growth in principal.5 Richard and Steven controlled their
real estate investments though a management company called 5C, Inc. It is alleged that 5C, Inc.
was the entity that made decisions about the amount of any possible income distributions to
owners. McLaughlin chose not to allocate any of Richard’s 50% interest in 5C, Inc. to Deborah’s
Trust. In addition, McLaughlin agreed to changes in the operating agreements of the entities
constituting the Closely-Held Interests “that further disenfranchised [Deborah] and specifically
benefitted [Steven].” SAC ¶ 109. Finally, McLaughlin allegedly used inadequate and improper
evaluations of the property interests allocated to the Deborah Trust resulting in a failure fully to
5 A Q-tip Trust such as Deborah’s Trust, is premised on the requirement that the
surviving spouse may direct that the principal in the trust be converted to income producing
property. By transferring to Deborah’s Trust minority interests in all the properties transferred,
and not even one property with Richard’s 50% interest, McLaughlin allegedly deprived Deborah
of any ability to affect what income would or could be distributed.
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fund the $ 2 million value of property required by the Revocable Trust. McLaughlin’s conduct, it
is alleged, was motivated by his interest to obtain and retain legal representation of Steven and
the various real estate entities. The result of the alleged breaches of fiduciary duty was that the
income from Deborah’s Trust (intended by Richard to flow from $ 2 million worth of property)
was less than $ 25,000 annually.
The allegations regarding McLaughlin’s conduct, allegedly at the behest of Steven,
regarding the choice of property interests to fund Deborah’s Trust are the basis of Deborah’s
claims, as trustee of Deborah’s Trust, and individually, that McLaughlin breached fiduciary
duties and acted in bad faith. In addition, these allegations are the basis for the claims against
Steven for intentional interference with contract (the Prenuptial Agreement) and McLaughlin for
aiding and abetting the tort of interference with contract.
Claim for Conversion
The SAC alleges conversion with respect to the interest of Deborah’s Trust in a property
called Nesmith Park, LLC. In short, Deborah claims that Nesmith sold its real estate holdings in
November 2015 for $ 6.8 million. On April 6, 2017, Nesmith informed Deborah’s Trust that it
intended to make a distribution to its members of $ 1,256,092 as a return of capital, “intended to
cover the federal tax liability of all Members.” SAC, Ex. P. The portion of the return of capital
attributed to Deborah’s Trust was $ 281,787. Nevertheless, while Nesmith distributed the return
of capital to other members of the LLC, it only returned to Deborah’s Trust a portion of the
return of capital. Nesmith unilaterally decided to keep $ 182,638 belonging to Deborah’s Trust in
an escrow account because Nesmith did not have “any desire to become embroiled in a dispute
between the Marital [Deborah’s] Trust and the Family Trust.” The SAC alleges that by these
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actions Nesmith wrongfully exercised dominion and control over property of Deborah’s Trust
and therefore converted the amount not distributed. Exhibit P to the SAC is a letter on the
letterhead of C.C. Real Investments, Inc. The letter is signed by Thomas O. Levenberg, President
of C.C. Real Investments, Manager of Nesmith Park LLC. On that basis, plaintiffs allege that
C.C. Real Investments, Inc. is also liable for conversion. Deborah’s Trust also cites these events
as further evidence of McLaughlin’s breach of fiduciary duty because McLaughlin was acting as
legal counsel to C.C. Real Investments, Inc. at this time when he allegedly still owed fiduciary
duties to Deborah’s Trust arising from being trustee of Richard’s Revocable Trust.
DISCUSSION
A motion to dismiss for failure to state a claim upon which relief may be granted under
Mass. R. Civ. P. 12(b)(6) permits “prompt resolution of a case where the allegations in the
complaint clearly demonstrate that the plaintiff’s claim is legally insufficient.” Harvard Crimson,
Inc. v. President & Fellows of Harvard Coll., 445 Mass. 745, 748 (2006). To survive a motion
to dismiss, a complaint must set forth the basis for the plaintiff’s entitlement to relief with “more
than labels and conclusions.” Iannacchino v. Ford Motor Co., 451 Mass. 623, 636, quoting Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). At the pleading stage, Mass. R. Civ. P.
12(b)(6) requires that the complaint set forth “factual ‘allegations plausibly suggesting (not
merely consistent with)’ an entitlement to relief . . . .” Id., quoting Bell Atl. Corp., 550 U.S. at
557. The court must, however, accept as true the allegations of the complaint and draw every
reasonable inference in favor of the plaintiff. Curtis v. Herb Chambers I-95, Inc., 458 Mass. 674,
676 (2011). With respect to a statute of limitations defense at the Rule 12(b)(6) stage, the facts in
the complaint must “clearly reveal that the action was commenced beyond the time constraints of
10
the statute of limitations.” Epstein v. Seigel, 396 Mass. 278, 279 (1985).
A. Motion to Dismiss by McLaughlin and Berluti McLaughlin & Kutchin LLP6
The allegations of the SAC against McLaughlin must be accepted as true at this stage of
the litigation. I find that the allegations reasonably outline a claim by Deborah and Deborah’s
Trust for breach of fiduciary duty. With respect to the allegations concerning the allocation of
property interests into Deborah’s Trust, the SAC adequately pleads that McLaughlin acted in bad
faith. All of these allegations remain to be proven.
McLaughlin’s motion to dismiss makes two arguments with respect to the adequacy of
the allegations in the SAC. He argues (a) that the SAC does not sufficiently allege a theory of
damages, and (b) that the claim of willful bad faith is not stated with particularity. Both
arguments are rejected.
As to damages, the pleading threshold is very low. Plaintiffs do not have to explicate a
particular amount of damages or a potential calculation of damages. Instead, at this stage the
SAC must reasonably show that Deborah and Deborah’s Trust were harmed by McLaughlin’s
alleged conduct. The SAC meets this test as the allegations reasonably suggest that but for the
alleged conduct, Deborah’s Trust would have been in a better position to produce a higher level
of income from the assets used to fund the trust. McLaughlin cites no authority, nor could he, for
the proposition that a trustee is immune to personal liability for damages caused by his breach of
fiduciary duty to the trust and its beneficiary.
McLaughlin cites Mass. R. Civ. P. 9 (b) for the argument that plaintiffs’ claims of breach
6 The law firm makes no argument for dismissal other than the arguments asserted by
McLaughlin. At this stage, the law firm appears to assume that if McLaughlin is held to respond
to the allegations of the SAC, then so should the firm on the basis of potential vicarious liability.
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of fiduciary duty, including willful bad faith, must be pleaded with particularity. The rule does
not, however, include breach of fiduciary duty as one of the averments that must be pleaded with
particularity. Indeed, the rule goes on to say that “[m]alice, intent, knowledge, and other
condition of mind of a person may be averred generally.” In any event, however, I find that the
allegations are sufficiently particular (indicating the time, place and persons involved in the
alleged acts) to satisfy the pleading requirement. To repeat, the court must accept plaintiffs’
allegations as true at this stage of the case.
The lead arguments in McLaughlin’s motion to dismiss are that plaintiffs’ claims against
him and his law firm are time barred. As referenced above, to succeed on a motion to dismiss
based upon a statute of limitations defense the moving party must be able to point to facts in the
SAC that “clearly reveal that the action was commenced beyond the time constraints of the
statute of limitations.” Epstein v. Seigel, 396 Mass. 278, 279 (1985).
The first argument is that the claims against McLaughlin are barred by the six months
statute of limitations in G.L. c. 203E, § 1005 (a). This argument rests on the July 31, 2014 letter
from McLaughlin to Deborah attached to McLaughlin’s motion. While this letter was not
attached to the SAC, or specifically mentioned in the SAC, it appears that plaintiffs do not
dispute the authenticity or receipt of the letter. McLaughlin contends that the letter, describing his
allocation of the properties from the Revocable Trust to Deborah’s Trust was a “final account or
other statement fully disclosing the matter and showing termination of the trust relationship
between the trustee and the beneficiary” as required by the statute in order to trigger the six
months limitation period.
On its face, the July 31, 2014 letter says nothing about the termination of the trust
12
relationship. Indeed, McLaughlin continued as trustee at least for Deborah’s Trust, if not the
Revocable Trust, for months. But more importantly, it cannot be determined on a motion to
dismiss whether the letter is a “final account”7 or whether it “fully disclosed” the matter.
Consequently, the application of this statute of limitations cannot be decided on a motion to
dismiss.
Next, McLaughlin avers that Deborah waived her claims against McLaughlin as trustee by
not objecting to the July 31, 2014 letter within sixty days, as required by the Revocable Trust.
Again the application of this provision depends on the adequacy of the disclosure by McLaughlin
and cannot be determined on a motion to dismiss.
Finally, McLaughlin argues that the claim by Deborah (not Deborah’s Trust) to obtain
reimbursement from the estate for legal fees incurred by Deborah in connection with obtaining
the Revere residence free and clear is barred by G.L. c. 190B, § 3-803 (a). That statute provides a
time bar against claims against a personal representative. There can be no question that
Deborah’s claim for reimbursement of attorney’s fees is a claim, as a creditor of the deceased,
against McLaughlin as the personal representative of the estate. This claim, therefore was
required to be asserted by Deborah in an action commenced within one year after the date of
death of the deceased. The present action was commenced in July 2016, more than three years
after Richard’s death. As a result, Deborah’s claim for reimbursement of attorney’s fees is barred.
In sum, the motion to dismiss Count I of the SAC by McLaughlin and his law firm must
be denied, except for Deborah’s claim for reimbursement of attorney’s fees. That claim is
7 The letter does not say it is a final account and it does not appear to meet the
requirements of an account as described in G.L. c. 203E, § 813 because there is no description of
receipts and disbursements, including the amount of the trustee’s compensation.
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dismissed as untimely. The motion by McLaughlin and his law firm to dismiss Count IV of the
SAC will be addressed in the next section.
B. Motion to Dismiss by Steven Clayman
Steven is named as a defendant in Counts II and III of the SAC. Count II alleges that
Steven, as a trustee, officer, director and shareholder of the several Closely-Held Interests in
which Deborah’s Trust held a life interest, owed a fiduciary duty to Deborah’s Trust and
Deborah. Steven allegedly took steps to disenfranchise Deborah’s Trust, “freeze out” the Trust
and eliminate the value of the interests of Deborah’s Trust resulting in “little to no payment of
distributions” to Deborah’s Trust. SAC ¶¶ 162, 164, 165. Count III alleges that Steven
“intentionally and knowingly induced McLaughlin as Executor of the Estate to break the
contractual relationship with Deborah [the Prenuptial Agreement] and not fulfill the obligation to
fund fully [Deborah’s Trust] with the sum of two million dollars.” SAC ¶ 173.
In his motion to dismiss Steven does not dispute that he owes a fiduciary duty to
Deborah’s Trust because of the Trust’s equity interests in the Closely-Held Interests. Steven does
not deny that he operated the Closely-Held Interests for capital growth, not income production.
He argues that he is absolutely entitled to do so. That is true only to a degree. “As a fiduciary, a
partner must consider his or her partner’s welfare, and refrain from acting for purely private
gain.” Meehan v. Shaughnessy, 404 Mass. 419, 434 (1989).
The SAC alleges that in exercising control over the Closely-Held Interests, Steven failed
to observe and respect corporate form among the LLCs and management companies. He is
alleged to have intermingled the relationships among the Closely-Held Interests with intercompany
loans, all to the purpose of avoiding income distributions to the owners, including,
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specifically, Deborah’s Trust. The SAC also alleges that Steven deprived Deborah’s Trust of
“information sufficient to understand the management and financial circumstances” of the
entities. SAC ¶ 163. At the motion to dismiss stage, this is enough to assert a breach of fiduciary
duty.
With respect to Count III of the SAC, Steven accurately points out that a claim for
intentional interference with contract requires an allegation of improper motive or improper
means or both. Mere interference with a contract is not actionable. See G.S. Enterprises, Inc. v.
Falmouth Marine, Inc., 410 Mass. 262, 272 (1991) (“In an action for intentional interference
with contractual relations, the plaintiff must prove that: (1) he had a contract with a third party;
(2) the defendant knowingly induced the third party to break that contract; (3) the defendant’s
interference, in addition to being intentional, was improper in motive or means; and (4) the
plaintiff was harmed by the defendant’s actions”). Steven argues that, in his contact with
McLaughlin, he was motivated by his desire to manage the Closely-Held Interests in his own best
interest. Thus, there can be no improper means or motive. Pembroke Country Club, Inc. v.
Regency Savings Bank, F.S.B., 62 Mass. App. Ct. 34, 39 (2004)(legitimate advancement of
actor’s own interest is not improper conduct).
Steven’s argument ignores, however, the allegations of the SAC. The SAC avers that
Steven was motivated by spite; i.e., that he was unhappy with the largesse left to Deborah by
Richard. Next, the SAC contends, read indulgently, that Steven acted with improper means by
promising future legal business to McLaughlin in exchange for McLaughlin’s cooperation to
defeat the contractual obligations of the Prenuptial Agreement. “[I]mproper conduct ‘may
include ulterior motive (e.g., wishing to do injury) or wrongful means (e.g., deceit or economic
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coercion,’; the plaintiff need not prove both.” Cavicchi v. Koski, 67 Mass. App. Ct. 654, 658
(2006)(citation omitted). The SAC alleges sufficient facts (wishing to deprive Deborah of full
inheritance and economic inducement to McLaughlin) that, if true, support a reasonable inference
of improper interference. Id. at 660 n.9, 663 (Rule 12 (b) (6) dismissal reversed where allegations
in complaint of improper means, while conclusory, were sufficient to resist a motion to dismiss).
“The propriety of an actor’s motives in a particular setting necessarily depends on the attending
circumstances, and must be evaluated on a case-by-case basis.” G. S. Enterprises, Inc., 410 Mass.
at 273. This kind of evaluation of the facts cannot be done on a motion to dismiss.
For the reasons stated, Steven’s motion to dismiss counts II and III must be denied.
Likewise, McLaughlin’s motion to dismiss count IV of the SAC must be denied. Count IV alleges
that McLaughlin aided and abetted Steven’s breach of fiduciary duties and interference with
contract. It is alleged that McLaughlin actively and knowingly participated in Steven’s alleged
torts. That is enough at the pleading stage. See Go-Best Assets Ltd. v. Citizens Bank of
Massachusetts, 463 Mass. 50, 64 (2012) for the elements of an aiding and abetting claim.
Applied to this case, the SAC adequately pleads a claim for aiding and abetting against
McLaughlin by alleging the following elements: (1) that Steven committed the relevant torts; (2)
that McLaughlin knew Steven was committing the torts; and (3) that McLaughlin actively
participated in or substantially assisted in the commission of the torts. McLaughlin’s motion to
dismiss Count IV must be denied.
C. Motion to Dismiss by Business Entities
The SAC names business entities, all of which were Closely-Held Interests under the
Revocable Trust, as defendants in this action. The nine business entities mentioned in the SAC
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move to dismiss. For five of the entities, the argument for dismissal is that the SAC asserts no
cognizable claim against them. The entities are sued simply because Deborah’s Trust views the
entities as indispensable parties to the possible relief sought; namely, to obtain an equitable reallocation
of ownership interests in the properties originally held in the Revocable Trust and
distributed to Deborah’s Trust and the Family Trust. For two of the entities, 5C, Inc. and C.C.
Real Investments, Inc., named in Count II of the SAC as the management companies utilized by
Steven to execute a plan to deprive Deborah’s Trust of reasonable income from its ownership
interests, the argument for dismissal is that such companies owed no fiduciary duty to Deborah’s
Trust. Finally, for two of the entities, Nesmith Park LLC and C.C. Real Investments, Inc., named
in Count V of the SAC for allegedly converting funds belonging to Deborah’s Trust, the
argument for dismissal is that Count V fails to state the requisite elements of the tort of
conversion.
With respect to the business entities named solely as indispensable parties, plaintiffs
concede that they do not allege a substantive claim against those entities. They argue, however,
that the business entities are necessary and indispensable parties because plaintiffs seek, in
addition to monetary damages, potential equitable relief to re-allocate Richard’s interests in the
business entities to Deborah’s Trust.
Mass. R. Civ. P. 19 mandates that plaintiffs join as parties individuals and entities that, in
their absence, complete relief could not be accorded. This is, in part, a protection because such
entities have an interest in the subject matter (the proper allocation to and management of
property interests in Deborah’s Trust) and their interest could be impaired or impeded by the
potential remedy sought by Deborah’s Trust. Defendants argue that Rule 19 is available to a
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defendant moving to dismiss a claim for failure to join an indispensable party, but the rule is not
an authorization to a plaintiff to add a party against whom no independent substantive claim is
asserted. That argument is incorrect. The plaintiff has an obligation to name as parties all persons
falling within the various tests prescribed in Rule 19 (a) for when a party should be joined. Smith
and Zobel, Rules Practice, 6 Mass. Prac. Series § 19.5 (2006). “If plaintiff has failed to join such
a party as a defendant, the court must order joinder.” Id. at § 19.2. The parties named as
indispensable parties by Deborah’s Trust in the SAC clearly fall within the tests prescribed in
Rule 19 (a). Accordingly, so long as a potential remedy of re-allocation remains in the case, the
business entities and other indispensable parties must remain as parties.
5C, Inc. and C.C. Real Investments, Inc. move to dismiss Count II of the SAC. Read
indulgently, Count II alleges that these companies were the vehicles used by Steven to breach
fiduciary duties owed to Deborah’s Trust arising from Deborah’s Trust’s interest in the Closely-
Held Companies. Under well established principles of agency, the companies might be held to be
vicariously liable for the alleged conduct of Steven. That is enough to satify the Rule 12 standard.
Count II will not be dismissed.
Lastly, Nesmith Park LLC and C.C. Real Investments, Inc. move to dismiss Count V,
Conversion. Count V alleges that Nesmith, aided and abetted by C.C. Real Investments, is
exercising dominion and control over property owned by Deborah’s Trust.8
“The elements of conversion require that a defendant be proved to have ‘intentionally or
wrongfully exercise[d] acts of ownership, control or dominion over personal property to which
8 “Owned” in this case means that the property is part of the corpus of Deborah’s Trust
for her benefit during Deborah’s lifetime.
18
he has no right of possession at the time . . . .’” Grand Pac. Fin. Corp. v. Brauer, 57 Mass. App.
Ct. 407, 412 (2003), quoting from Abington Natl. Bank v. Ashwood Homes, Inc., 19 Mass. App.
Ct. 503, 507 (1985). See Matter of Hilson, 448 Mass. 603, 611 (2007) (“The elements of
conversion may be established by a showing that one person exercised dominion over the
personal property of another, without right, and thereby deprived the rightful owner of its use and
enjoyment”). Money may be the subject of conversion, and “[t]here is no requirement that the
one converting property be shown to have had the intent to deprive permanently the rightful
owner of its use and enjoyment, as in stealing.” Matter of Hilson, 448 Mass. at 611. One may be
liable for conversion even though he or she received no benefit from the conversion. Boston
Educ. Research Co. v. American Mach. & Foundry Co., 488 F.2d 344, 348 (1st Cir. 1973)
(“Liability will lie for conversion . . . even though the defendant received no benefit from his
deed”). Finally, funds held in an escrow account may be the subject of a conversion claim.
Grand Pac. Fin. Corp. v. Brauer, 57 Mass. App. Ct. at 412-414. Applying these principles,
Count V adequately pleads a claim for conversion.
D. Motion to Dismiss of the Family Trust, Amy L. Nechtem, Trustee
Plaintiffs concede that they assert no substantive claim against the Family Trust. Instead,
they name the Family Trust, by its trustee, Amy L. Nechtem, as an indispensable party defendant
in the SAC. As with the Business Entities, plaintiffs assert that the equitable remedy they seek
implicates the interests of the Family Trust as described and protected by Rule 19 (a) of the
Mass. R. Civ. P. For the reasons stated above in connection with the motion to dismiss of the
business entities, the motion of the Family Trust must be denied.
19
CONCLUSION
The Motion to Dismiss of John T. Mclaughlin and his law firm will be ALLOWED, in
part, and DENIED, in part. The motion is allowed with respect to the claim by Deborah
Clayman, individually, for reimbursement of attorney’s fees she incurred in connection with the
transfer of ownership of the Revere residence. Otherwise, the motion to dismiss is denied.
The motions to dismiss of Steven Clayman, Amy L. Nechtem, Trustee of the Family
Trust and the business entities are DENIED.
By the Court,
____________________________
Edward P. Leibensperger
Justice of the Superior Court
August 14, 2017
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Posted by Massachusetts Legal Resources - September 6, 2017 at 10:01 pm

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McLaughlin, et al. v. American States Insurance Company (Lawyers Weekly No. 11-099-16)

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

15-P-729                                        Appeals Court

DANIEL McLAUGHLIN & another[1]  vs.  AMERICAN STATES INSURANCE COMPANY.

No. 15-P-729.

Middlesex.     May 19, 2016. – August 12, 2016.

Present:  Kafker, C.J., Cohen, & Green, JJ.

Consumer Protection Act, Insurance, Offer of settlement, Unfair act or practice, Attorney’s fees, Damages.  Insurance, Settlement of claim, Unfair act or practice.  Damages, Attorney’s fees.  Practice, Civil, Attorney’s fees. read more

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Posted by Massachusetts Legal Resources - August 13, 2016 at 5:43 am

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McLaughlin v. City of Lowell (Lawyers Weekly No. 11-093-13)

NOTICE: The slip opinions and orders posted on this Web site are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports. This preliminary material will be removed from the Web site once the advance sheets of the Official Reports are published. 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

James McLAUGHLIN vs. CITY OF LOWELL.

No. 11-P-2072.

Middlesex. February 7, 2013. – July 25, 2013.

Fire Fighter, Retirement, Incapacity. Municipal Corporations, Fire department, Retirement board. Public Employment, Accidental disability retirement, Reinstatement of personnel. Public Employee Retirement Administration Commission. Division of Administrative Law Appeals. Contributory Retirement Appeal Board. Administrative Law, Judicial review. Collateral Estoppel. Practice, Civil, Summary judgment, Judgment notwithstanding verdict. Employment, Discrimination. Anti-Discrimination Law, Employment, Handicap. read more

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Posted by Massachusetts Legal Resources - July 25, 2013 at 6:15 pm

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