Kiribati Seafood Company, LLC v. Crovo (Lawyers Weekly No. 12-162-16)

Plaintiff Kiribati Seafood Company, LLC (Kiribati) filed this legal malpractice action against defendant M. Delacy Crovo (Delacy) seeking to recover damages flowing from Delacy’s alleged role in violating a Washington state court order against Kiribati. Kiribati’s Amended Complaint asserts both contract-based and negligence-based claims as well a violation of 93A. The case is now before this Court on the defendant’s motion for summary judgment. Specifically, the defendant contends that Kiribati’s claims are barred by the applicable statutes of limitations. This Court agrees, and therefore concludes that the Motion must be ALLOWED.
The relevant facts in the summary judgment record, viewed in the light most favorable to Kiribati, are as follows.
Kiribati is a Washington state limited liability company formed in 2000 to own and operate a commercial fishing vessel. Currently, Kiribati is owned by Nicholas Coscia, who holds the majority interest, and a second individual with a minority interest named Steven Ross.
In 2000 and 2001, Kiribati refurbished a boat, the MADEE, with the expectation that it would be used in South Pacific commercial fishing operations. In 2001, the MADEE sustained damage due to a rudder failure. It was repaired in Tahiti, but suffered additional damage after a dry dock collapsed. Lawsuits ensued. Moran Windes & Wong, PLLC (MWW), a Seattle based law firm, represented Kiribati in an action brought in Hawaii related to the rudder failure. A French law firm, later acquired by the Paris office of Dechert, LLC (Dechert), represented Kiribati on its claim for damages to the MADEE sustained in the dry dock collapse. Sometime in May 2010, Dechert on behalf of Kiribati, settled the dry dock collapse case, and the proceeds of the settlement (the Settlement Funds) were sent to Dechert. At the time of the settlement, Delacy’s brother Charles Crovo (Charles) was the majority owner of Kiribati, with Coscia holding a minority interest.
Delacy is a Massachusetts attorney who has acted as (or held herself out to be) counsel for Kiribati at various times commencing in 2000. At the heart of this lawsuit is the role she played in the transfer of the Settlement Funds from Dechert to other entities. In a letter dated April 29, 2010 to Dechert’s Paris office (the April 2010 Letter), Delacy stated that she was Kiribati’s corporate attorney and that Charles Crovo was authorized to make all monetary decisions on Kiribati’s behalf. This letter was sent under Delacy’s married name, Marie D. Carlson, with a letterhead that read, “Law Offices of Marie Carlson.” Delacy sent a second letter, again under the name “Marie Carlson,” to Dechert in May 17, 2010 (the May 2010 Letter), again stating that she was Kiribati’s corporate counsel and that, in her legal opinion, Charles Crovo was authorized to receive the Settlement Funds on Kiribati’s behalf. Delacy provided Dechert with the information necessary to deposit the funds in her IOLTA account.
On May 19, 2010, Dechert transferred the Settlement Funds to Delacy, who subsequently disbursed the funds to Charles and others.
While these events were taking place, MWW, the Seattle law firm, was looking to get paid its attorney’s fees for representing Kiribati in the separate litigation for damages caused by the rudder failure. On May 25, 2010, MWW filed an action in Washington state court asserting an attorney’s fee lien against the Settlement Funds and, to secure that lien, asked the court to order Kiribati to deposit the funds into the court registry. MMW, PLLC v. Kiribati Seafood Co., et al. Civ. No. 10-2-18839 SEA (King County Superior Court). The Seattle court allowed that motion on June 22, 2010 and ordered that the Settlement Funds be deposited with the court by June 25, 2010 (the June 2010 Order). Kiribati did not comply with that Order.
As a consequence of that noncompliance, MWW filed a motion to strip Charles and Coscia of any authority to act on behalf of Kiribati and to appoint a receiver. The motion alleged that Coscia and Charles, together with others, had engaged in acts of misconduct intended to circumvent the court’s June 2010 Order. In support, MWW alleged that Crovo had “invented a fictitious lawyer named ‘Marie Carlson’ who claimed to be Kiribati’s corporate counsel and wrote up a fictitious certification that Mr. Crovo presented to the Paris Bar Association and the Paris Bank, which caused them to both remove their financial controls on the account and facilitated the payout of the $ 860,000 to Mr. Crovo.” Attached to the motion was the April 2010 Letter from Delacy to the Dechert attorney in Paris. The motion concluded: “The rats are fleeing the ship and the court needs to act before it sinks and irreparably harms the creditors.”
Kiribati filed an opposition to the motion, supported by Delacy’s affidavit dated July 1, 2010. Coscia participated in Kiribati’s opposition to MWW’s motion, which he admitted reading. In her affidavit, Delacy explained that she regularly uses her married name, “Marie D.
Carlson,” for her legal work. She stated that that she had disbursed the Settlement Funds to various trusts at the direction of Charles on June 8 and on June 10, 2010. Delacy denied knowing of MMW’s May 25 2010 request that the Settlement Funds be deposited with the court at the time that she disbursed the funds to these other entities.
On July 2, 2010, the Seattle court allowed MWW’s motion to appoint a receiver, finding that Kiribati’s noncompliance with its June 2010 Order placed it in contempt. The court appointed James F. Rigby as receiver of Kiribati and granted him “all the powers necessary to act on behalf of Kiribato” and specifically gave him the authority to obtain custody over the Settlement Funds. Rigby undertook an investigation as to what had happened with the money. On June 29, 2011, he filed a written report with the court stating that the funds had been transferred from Delacy’s IOTA account to Charles personally as well as to companies he controlled. This report was sent to Coscia, among others. On September 2011, Charles paid the Settlement Funds into the Seattle court registry.
The receivership was terminated on June 26, 2013. Coscia took over control of Kiribati together with Ross. Less than a week later, Kiribati sued Dechert here in Massachusetts. See Kiribati et al. v. Dechert, LLP, Civ. No. 13-2393-BLS 2 (Suffolk Superior court). Kiribati alleged that Dechert had committed legal malpractice in releasing the Settlement Funds to Delacy. The case was ultimately dismissed on summary judgment.
Kiribati filed the instant lawsuit against Delacy on September 8, 2014. It alleged that Delacy had committed legal malpractice by failing to comply with the Seattle court’s June 2010 Order. As a consequence of her misconduct, Kiribati alleged that it had been forced to incur attorney’s fees and other costs in connection with the appointment of a receiver and the receiver’s efforts to recover the Settlement Funds.
Delacy argues that all of the claims asserted against her are time-barred because the statute of limitations began to run on July 2, 2010 when the Seattle court allowed the motion to appoint a receiver for Kiribati. She contends that, as of that date, Kiribati was aware that it sustained some appreciable harm – namely, the attorney’s fees associated with the appointment of the receiver and the fees that would likely be incurred in connection with the receiver’s recovery efforts. The parties agree that a three year statute of limitations applies to Counts I through VIII, which are those claims based on legal malpractice. G.L.c. 260 §4. A four year statute of limitations applies to Count IX alleging a violation of Chapter 93A. . See G.L.c. 260 §5A. This action was filed more than four years after July 2, 2010.
The statute of limitations in a legal malpractice claim begins to run when the client “knows or reasonably should know that he or she has sustained appreciable harm as a result of the lawyer’s conduct.” Lyons v. Nutt, 436 Mass. 244, 247 (2002), quoting Williams v. Ely, 423 Mass. 467, 473 (1996). “Reasonable notice that …a particular act of another person may have been a cause of harm to a plaintiff creates a duty of inquiry and starts the running of the statute of limitations.” Bowen v. Eli Lilly & Co., 408 Mass. 204, 210 (1990). “[I]t is not necessary that the plaintiff client know the full extent of harm or loss or know precisely in what manner and what harmful after-effects flow from the alleged malpractice . . . .” Frankston v. Denniston, 74 Mass. App. Ct. 366, 374, rev. den., 455 Mass. 1102 (2009). “Appreciable harm encompasses the incurring of legal expenses, such as litigation-related expenses in defending against, or advancing, an issue that is central to the alleged legal malpractice.” Id.
Applying those principles to the case before me, this Court concludes that the statute of limitations began to run no later than July 2, 2010, the date when the Seattle court appointed the
receiver at MMW’s request. That appointment occurred because Kiribati had failed to comply with the Court order to deposit the settlement money with the court registry. As to the reasons for noncompliance, that was set forth in detail in materials submitted both in support and in opposition to the motion. Based on these materials (and Coscia’s own admission that he was familiar with them), Kiribati clearly knew that Delacy convinced Dechert to wire the Settlement Funds to her IOLTA account and that she then disbursed those funds so as to put Kiribati in violation of the June 2010 Order. No later than July 2, 2010, Kiribati knew that Delacy had caused some appreciable harm to it – harm that would ultimately consist of the attorney’s fees it incurred in connection with that appointment and the recovery of the disbursed monies.
Kiribati maintains that it did not have knowledge or sufficient notice that it was harmed by Delacy’s conduct until Coscia was deposed in 2012. It was only on that later date that Coscia says that he became aware, for the first time, that Delacy conspired with her brother to disburse the Settlement Funds to family members or entities in which Charles Crovo had an interest. Before that (according to Coscia) , he relied on the assurance of his business partners – and on Delacy’s insistence of her innocence in the matter — that the funds had been applied to pay Kiribati’s creditors and that Delacy had done nothing wrong. But Coscia unquestionably knew in July 2010 that MWW was accusing Delacy of misconduct and that her actions led to the violation of the court order and the appointment of a receiver – events which triggered the damages that Kiribati now seeks in this lawsuit. That Coscia did not know precisely where those funds went is irrelevant to the issue of when the statute of limitations began to run.
It is true that once the receiver was appointed, then only the receiver could bring suit on behalf of Kiribati. That did not toll the statute of limitations, however. See Comer of Insurance v. Bristol Mut. Liability Ins. Co., 279 Mass. 325, 325 (1932) (statute of limitations continues to
run even after a receiver is appointed). That the receiver did not file suit against Delacy is a decision that is binding on Kiribati, whether Coscia as the current majority owner agrees with that decision or not. The receivership was terminated on June 26, 2013 and Kiribati (with Coscia in control) could have instituted suit then. Indeed, it did file suit against Dechert just one week later. It did not name Delacy as a defendant. Now that it has done so, it is too late.
The appointment of the receiver also undercuts two other arguments that Kiribati makes in opposition to the instant motion. Its first argument relies on the continuing representation doctrine and is based on Kiribati’s contention that Delacy was its lawyer, thus tolling the statute of limitations during that period in which she was corporate counsel. But Delacy ceased to have any authority to act on behalf of Kiribati once the receiver was appointed, and there is no evidence that she later served as Kiribati’s counsel once the receivership was dissolved. The second argument relies on the doctrine of adverse domination: because Coscia was a minority owner until 2012, he contends that he was not in a position to take any action on behalf of Kiribati since Charles held the majority interest. Like Delacy, however, Charles ceased to have any authority to act on behalf of Kiribati once the receiver was appointed. Once the receivership was terminated, Kiribati was controlled by Coscia as majority owner, not Charles. In short, neither doctrine is of assistance to the plaintiff.
For all of the foregoing reasons and for other reasons articulated in the defendant’s Memoranda, defendant’s Motion for Summary Judgment is ALLOWED and the Amended Complaint is hereby DISMISSED with prejudice.
Janet L. Sanders
Dated: November 18, 2016 Justice of the Superior Court

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