Opinion
20-P-854
10-05-2021
Daniel P. PETRUCCI v. Charles ESDAILE & others.
MEMORANDUM AND ORDER PURSUANT TO RULE 23.0
These cross appeals arise from a business dispute among the four founders of Market Maker Solutions LLC (MMS), a Delaware limited liability company (LLC). The plaintiff, Daniel P. Petrucci, filed an action in the Superior Court against his former partners, defendants Charles Esdaile, Christopher Hayes, and Duncan McIntyre, the gravamen of his complaint being that the defendants acted to freeze him out of MMS. Petrucci also asserted claims against Altenex, LLC (Altenex), the successor in interest to a Massachusetts entity into which the individual defendants transferred the assets of MMS. All but two of Petrucci's claims were dismissed or waived prior to trial. After a jury-waived trial, the judge found in favor of Petrucci and awarded rescissory damages, jointly and severally, against the individual defendants and Altenex. Final judgment entered thereafter in the amount of $633,976.51. All parties appeal -- Petrucci from the pretrial dismissal of the claims alleged in his various amended complaints, and the individual defendants and Altenex from the judgment against each of them. Petrucci and the individual defendants (but not Altenex) also challenge the amount awarded in damages. We affirm.
By order of the court, the case was transferred to the business litigation session.
Discussion. 1. Choice of law as to the statute of limitations. As a preliminary matter, the individual defendants challenge the judge's decision to apply the Massachusetts six-year statute of limitations, G. L. c. 260, § 2, rather than the three-year Delaware limitations period of Del. Code Ann. tit. 10, § 8106, to Petrucci's breach of contract claim, the only claim against them on which he prevailed.
Whether the statute of limitations bars a plaintiff's recovery is a legal conclusion that we review de novo. See Crocker v. Townsend Oil Co., 464 Mass. 1, 5 (2012).
Section 10.4 of the MMS Limited Liability Company Agreement (operating agreement) provided that the agreement "shall be governed exclusively by the laws of the State of Delaware, and specifically the [Delaware Limited Liability Company] Act." The judge determined that, despite this language, under the requisite functional analysis, the Massachusetts limitations period applied. See Nierman v. Hyatt Corp., 441 Mass. 693, 695 (2004), citing New England Tel. & Tel. Co. v. Gourdeau Constr. Co., 419 Mass. 658, 664 (1995) (noting adoption of functional analysis, which considers limitations issue as choice of law question under principles set forth in Restatement [Second] of Conflict of Laws § 142 [Supp. 1989], as amended in 1988). We agree.
The Supreme Judicial Court in Gourdeau "departed from the traditional rule of law that characterized limitations statutes as procedural and automatically applied the statute of limitations of the forum State," adopting instead the "functional approach." Nierman, 441 Mass. at 695.
As a general principle, "[w]here the parties have expressed a specific intent as to the governing law, Massachusetts courts will uphold the parties’ choice as long as the result is not contrary to public policy" (citation omitted). Hodas v. Morin, 442 Mass. 544, 549-550 (2004). While the parties’ choice of law is a critical consideration, a functional analysis does not end its inquiry there; a choice of law provision is one, but not the only, factor to consider. See id. at 550-553 (in determining whether to honor parties’ declared intent for agreement to be governed by Massachusetts law, applying choice of law principles set forth in Restatement [Second] of Conflict of Laws § 187 [2] [1971]).
Although we are skeptical of the judge's suggestion, based on Shamrock Realty Co. v. O'Brien, 72 Mass. App. Ct. 251, 257 & n.9 (2008), that a choice of law provision explicitly addressing the statute of limitations would require departure from the functional approach, as the operating agreement's choice of law provision did not specifically address the statute of limitations, we need not speculate on the effect an explicit provision might have had.
Here, relying on Andersen v. Lopez, 80 Mass. App. Ct. 813, 815-816 (2011), the judge engaged in a functional analysis based on the principles summarized in the Restatement. See Restatement (Second) of Conflict of Laws, supra at § 142 ("[U]nless the exceptional circumstances of the case make such a result unreasonable[,] ... [t]he forum state will apply its own statute of limitations permitting the claim unless: (a) maintenance of the claim would serve no substantial interest of the forum; and (b) the claim would be barred under the statute of limitations of a state having a more significant relationship to the parties and the occurrence"). See also Hodas, 442 Mass. at 550, quoting Restatement (Second) of Conflict of Laws, supra at § 187(2) ("The Restatement similarly presumes that the law the parties have chosen applies, unless ‘[a] the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties’ choice, or [b] application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state’ and is the State whose law would apply ... ‘in the absence of an effective choice of law by the parties’ ").
In performing this analysis, the judge noted that Petrucci and the individual defendants all lived and worked in Massachusetts during the relevant time period, they all executed the MMS operating agreement in Massachusetts, the agreement was allegedly breached through conduct that occurred in Massachusetts, including the defendants’ transfer of the assets of MMS to Altenex, and that the individual defendants all still lived in Massachusetts. In deciding that the Massachusetts statute governed in these circumstances under the operative standard, the judge appropriately reasoned that "Massachusetts has a substantial interest in the maintenance and resolution of these claims and a more significant relationship to the parties and to the facts giving rise to this dispute.... [Massachusetts] has a significant interest in seeing ... that its resident defendant[s] ... be held accountable for [their] conduct, which took place in Massachusetts, and which allegedly caused [p]laintiff's injury" (quotations and citation omitted). Accordingly, we conclude that the judge correctly applied the six-year limitations period established by G. L. c. 260, § 2, to Petrucci's claims of breach of contract. See Nierman, 441 Mass. at 696, quoting Restatement (Second) of Conflict of Laws, supra at § 142 ("Stated in affirmative terms, a forum should apply its own statute of limitations permitting the claim if it ‘would advance a substantial forum interest and would not seriously impinge upon the interests of other states’ ").
The parties agreed that if the Massachusetts statute applied, the contract claims were timely.
2. Claims based on the MMS operating agreement. As previously noted, the MMS operating agreement provided that its application and interpretation would be governed by Delaware law, including the Delaware Limited Liability Company Act, Del. Code Ann. tit. 6, §§ 18-101 et seq. (Delaware LLC Act). All agree that the substantive provisions of Delaware law control. Under well settled Delaware law, "[l]imited liability companies are creatures of contract, and the parties have broad discretion to use an LLC agreement to define the character of the company and the rights and obligations of its members." Kuroda v. SPJS Holdings, LLC, 971 A.2d 872, 880 (Del. Ch. 2009). Parties who create a Delaware LLC are free, by contract, to expand, restrict, or eliminate fiduciary and other duties that would otherwise be owed by a member or a manager of an LLC. See Del. Code Ann. tit. 6, § 18-1101(c), 1101(e).
Petrucci argues that the judge erred in dismissing, prior to trial, certain of his claims based on alleged violations of various provisions of the MMS operating agreement. The judge determined that the unambiguous, plain language of the operating agreement, along with the Delaware LLC Act, explicitly allowed the actions of the defendants at issue. We agree with the judge that the MMS operating agreement expressly permitted the individual defendants to dissolve MMS, to distribute its assets, and to create their own business entity to engage in the same business as MMS.
a. Breach of contract and misappropriation of corporate opportunities. Petrucci first challenges the dismissal of the claims contained in his second amended complaint against the individual defendants for breach of contract and breach of fiduciary duty based on the defendants’ competition with MMS and misappropriation of corporate opportunities belonging to MMS. These claims were dismissed in response to motions to dismiss filed by the individual defendants.
The judge determined that Petrucci's contract claims were governed by Delaware law under § 10.4 of the operating agreement; that his claims for breach of fiduciary duties were also governed by Delaware law because MMS was a Delaware limited liability company, see Harrison v. NetCentric Corp., 433 Mass. 465, 469-472 (2001) ; but that his claim for unjust enrichment was governed by Massachusetts law. We agree.
We review the allowance of a motion to dismiss pursuant to Mass. R. Civ. P. 12 (b) (6), 365 Mass. 754 (1974), de novo, accepting the allegations in the complaint as true and drawing all reasonable inferences in the nonmoving party's favor. See Curtis v. Herb Chambers I-95, Inc., 458 Mass. 674, 676 (2011). The ultimate inquiry is whether Petrucci alleged facts "so as to plausibly suggest an entitlement to relief" (quotation and citation omitted). Baker v. Wilmer Cutler Pickering Hale & Dorr, LLP, 91 Mass. App. Ct. 835, 842 (2017).
The judge determined that Petrucci's breach of contract claim for violating the duty not to compete failed because § 4.15 of the MMS operating agreement expressly permitted members of the company and their affiliates to "conduct or participate in any business or activity whatsoever," even if they did so in direct competition with MMS. The judge also noted that the provision expressly waived "any accountability, liability or obligation whatsoever" to MMS or to any other member of the company. We agree. See Nemec v. Shrader, 991 A.2d 1120, 1126 (Del. 2010) ("Parties have a right to enter into good and bad contracts, the law enforces both").
We further agree that provisions like § 4.15, which limit the fiduciary duties that LLC members owe to one another, and which waive liability for engaging in actions permitted by contract, are enforceable under Delaware law. See Wood v. Baum, 953 A.2d 136, 141 (Del. 2008), quoting Del. Code Ann. tit. 6, § 18-1101(e) (limited liability company agreement may "provide for the limitation or elimination of any and all liabilities" for breach of contract and breach of duties, including fiduciary duties, of a member, except for liability for "a bad faith violation of the implied contractual covenant of good faith and fair dealing").
While Petrucci now argues that the individual defendants’ conduct went beyond lawful competition, and into the realm of unfair competition and misappropriation of trade secrets, he did not assert such claims in the second amended complaint. With respect to his claims for usurpation of corporate opportunities, as framed through claims for breach of contract and breach of fiduciary duty, we agree with the judge that Petrucci failed to allege facts which, if true, would plausibly suggest an entitlement to relief.
b. Dissolution of MMS. Petrucci argues that the judge erred in his January 2020 order dismissing the breach of contract claim contained in the third amended complaint. The judge determined that the individual defendants did not breach the operating agreement by voting to dissolve MMS through the execution of written consents, without prior notice to Petrucci, even though they executed such consents while meeting together without Petrucci being present. The judge relied on the plain language of §§ 4.7, 4.15, 7.1, and 9.8 of the operating agreement, along with the Delaware LLC Act, which expressly allows action by written consent. See Del. Code Ann. tit. 6, § 18-302(d).
Section 4.7 provided that "all actions" of the MMS board "shall be taken either at a meeting ... or by written consent without a meeting." The provision further stated that such action may be taken "[n]otwithstanding any [other] provision," thus permitting the individual defendants to dissolve MMS by written consent, without satisfying either the notice or quorum requirements of §§ 4.5 and 4.6. As discussed in the previous section, § 4.15 of the MMS operating agreement expressly permitted members of the company and their affiliates to "conduct or participate in any business or activity whatsoever," even if they did so in direct competition with MMS. Section 7.1(a)(1), which addressed dissolution, provided that MMS "shall be dissolved, and its affairs wound up" upon the "election" of the board and a majority of the members. Section 9.8, echoing the language of § 4.7 (but here for members rather than the board), provided that "all actions" of the members "shall be taken either at a meeting ... or by written consent without a meeting." It also contained notice, quorum, and other requirements for actions of the members. We agree with the judge that the provisions unambiguously supported the actions related to the dissolution of MMS as taken by the individual defendants.
c. Breach of the implied covenant of good faith and fair dealing. Petrucci next asserts error in the portion of the judge's January 2020 order dismissing his claim for breach of the implied covenant of good faith and fair dealing, also contained in the third amended complaint. For the same reasons discussed in the previous section, the claim was properly dismissed. Under Delaware law, such a claim could only be sustained in circumstances where it was necessary to resolve unanticipated developments or to fill gaps in a contract's provisions. See Nemec, 991 A.2d at 1125. We agree with the judge that no such gaps existed here because the operating agreement expressly permitted the individual defendants to dissolve MMS and to pursue a similar business through an affiliate like Altenex. Delaware law does not permit the implied covenant to "infer language that contradicts a clear exercise of an express contractual right." Id. at 1127. Moreover, given that § 4.11, along with §§ 7.2 and 7.3 of the operating agreement, in effect imposed the "entire fairness standard," there was no gap for the implied covenant to fill with respect to the determination of the fair market value of MMS and the distribution of its assets by the individual defendants. The covenant "does not apply when the contract addresses the conduct at issue." Nationwide Emerging Managers, LLC v. Northpointe Holdings, LLC, 112 A.3d 878, 896 (Del. 2015). As the judge noted, even if the individual defendants had dissolved MMS under § 7.1 in order to freeze out Petrucci, Delaware law still holds that the implied covenant does not apply. See id. at 897 (disingenuous acts in accord with express contract terms do not implicate implied covenant). We discern no error.
Section 4.11 of the operating agreement requires that any transaction with a member or affiliate of a member be on terms "comparable to those available from third parties." Sections 7.2 and 7.3 call for the board, upon MMS's dissolution, to distribute the assets of MMS in kind to the members "to the extent practicable," and to "obtain the best prices for such assets," provided each member received his pro rata share of their fair market value.
d. Breach of fiduciary duty (fraud). Finally, we conclude that the judge, in the January 2020 order, correctly dismissed Petrucci's claim of breach of fiduciary duty by fraud. As discussed previously, § 18-1101(e) of the Delaware LLC Act allows members and managers to eliminate fiduciary duties, as the members and managers of MMS did here, relying on § 4.13 of the operating agreement. See Wood, 953 A.2d at 141. Section 4.13(a) eliminated the fiduciary duties of MMS members and managers "to the maximum extent permitted by applicable law." It provided that neither MMS nor any member or manager "shall have any claim against" any other member or manager "by reason of any act or omission" of such member or manager, as long as "such act or omission was performed ... within the scope of its authority under" the operating agreement, and "in good faith and in a manner that he or she reasonably believed to be in or not opposed to the best interests of" MMS.
Section 4.13(b)(1) further stated that "it will not constitute a breach of fiduciary or other duty" for members or managers "to engage in any business activity, including, without limitation, activities of the type conducted by [MMS], even if in direct competition with [MMS]."
To the extent the individual defendants did not act in good faith or in the best interests of MMS, we further agree with the judge's dismissal of Petrucci's fiduciary duty claim, given that it was based on the actions of the individual defendants in dissolving MMS, along with the in kind distribution of its assets, and the fact they engaged in the same business as MMS -- all of which were specifically permitted under the operating agreement. Where a contract, like the operating agreement, addresses the conduct on which a fiduciary duty claim is based, the fiduciary duty claim fails as a matter of Delaware law. "[W]here a dispute arises from obligations that are expressly addressed by contract, that dispute will be treated as a breach of contract claim," and as such, "any fiduciary claims arising out of the same facts that underlie the contract obligations would be foreclosed as superfluous." Nemec, 991 A.2d at 1129. Accordingly, Petrucci's breach of fiduciary claim was properly dismissed.
3. Chapter 93A claim against Altenex. The judge dismissed Petrucci's claim against Altenex under G. L. c. 93A because Petrucci and the individual defendants were the comembers of MMS and the wrongdoing alleged in the complaint was based entirely on their acts; therefore, Petrucci's allegations that the individual defendants had improperly transferred to Altenex assets and opportunities belonging to MMS constituted an intra-enterprise dispute that did not implicate c. 93A. "[D]isputes between parties in the same venture do not fall within the scope of G. L. c. 93A, § 11." Selmark Assocs., Inc. v. Ehrlich, 467 Mass. 525, 549 (2014). " ‘Inter-enterprise’ disputes, including those ... between or among fellow shareholders, are essentially private in nature, and thus not considered ‘commercial transactions’ within the meaning of c. 93A." Id. at 550. We agree that Petrucci alleged no facts plausibly suggesting that the alleged misconduct by Altenex involved "trade or commerce," as opposed to conduct that occurred in the context of a purely private, intra-business dispute. See Office One, Inc. v. Lopez, 437 Mass. 113, 125 (2002), quoting G. L. c. 93A, § 2 (violations of G. L. c. 93A "require unfair or deceptive acts or practices ‘in the conduct of any trade or commerce.’ "). Nor did Petrucci allege any facts plausibly suggesting that Altenex -- a company consisting only of the individual defendants and a product of their wrongdoing -- engaged in any conduct after the dissolution of MMS that was unlawful or otherwise constituted a c. 93A violation. See Synergistics Tech., Inc. v. Putnam Invs., LLC, 74 Mass. App. Ct. 686, 689-691 (2009) (merely competing to convince customers to do business with a different company does not violate c. 93A); Kurker v. Hill, 44 Mass. App. Ct. 184, 190-191 (1998) (chapter 93A inapplicable to "private grievance" or "internal business dispute" among shareholders in close corporation, including alleged freeze-out and improper sale of corporate assets).
Petrucci has waived his c. 93A claims against the individual defendants.
We acknowledge the limitations of the intra-venture exception discussed in Governo Law Firm, LLC v. Bergeron, 487 Mass. 188, 195 (2021) (intra-venture exception to "otherwise broad reach" of c. 93A "does not mean that an employee never can be liable to its employer under G. L. c. 93A, § 11"). Governo teaches that "[w]here an employee misappropriates his or her employer's proprietary materials during the course of employment and then uses the purloined materials in the marketplace, that conduct is not purely an internal matter; rather, it comprises a marketplace transaction that may give rise to a claim under G. L. c. 93A, § 11." Id. at 195-196. The fact that "the individuals were employees at the time of the misappropriation does not shield them from liability under G. L. c. 93A, § 11, where they subsequently used the ill-gotten materials to compete with their now-former employer." Id. at 196. Here, however, there is no evidence that the individual defendants unlawfully misappropriated or used any "ill-gotten materials," or otherwise engaged in other misconduct before they dissolved MMS, distributed its assets, appropriated its corporate opportunities, and engaged in the same business as MMS -- conduct all expressly permitted under the MMS operating agreement. For all of the above reasons, the judge did not err in dismissing the c. 93A claim.
4. Defendants’ cross appeals. Ultimately, the only claims tried were (a) Petrucci's breach of contract claim against the individual defendants for violating the "entire fairness" standard, and (b) Petrucci's claim for unjust enrichment against Altenex. The judge found in favor of Petrucci on both claims and awarded damages. The individual defendants appeal from the judgment on the contract claim, and Altenex appeals from the judgment on the unjust enrichment claim.
We review the judge's findings of fact for clear error and the rulings of law de novo. See U.S. Bank Nat'l Ass'n v. Schumacher, 467 Mass. 421, 427 (2014). The trial judge, "who has a firsthand view of the presentation of evidence," is in the best position to assess the credibility of the witnesses and the weight of the evidence, especially in a case involving conflicting testimony. Demoulas v. Demoulas Super Mkts., Inc., 424 Mass. 501, 509-510 (1997). We discern no error in the judge's extensive and thorough review of the evidence as set forth in his findings of fact.
a. Breach of contract claim against the individual defendants for violation of the "entire fairness" standard. Petrucci's remaining theory supporting his contract claim alleged that the individual defendants breached their duty under the MMS operating agreement and under Delaware law to treat Petrucci with "entire fairness" in disposing of the assets of MMS. The individual defendants’ sole argument on appeal is that they are entitled to judgment as matter of law because the claim was untimely, an argument we have already rejected, see supra at 2-6. Were we to reach the merits, we would conclude that there was no error.
Under Delaware law, the burden of proving that the duty of entire fairness was met is on the individual defendants. See Gatz Props., LLC v. Auriga Capital Corp., 59 A.3d 1206, 1213 (Del. 2012). To demonstrate that they discharged their obligations under the operating agreement to produce "a fair transaction," the individual defendants had to show that they engaged in fair dealing and provided a fair price. Kahn v. Tremont Corp., 694 A.2d 422, 432 (Del. 1997). Under Delaware law, this is an objective standard. See Reis v. Hazelett Strip-Casting Corp., 28 A.3d 442, 459 (Del. Ch. 2011) (to establish entire fairness, "the transaction itself must be objectively fair, independent of [one's] beliefs" [citation omitted]).
Evidence of fair dealing includes how the transaction was conducted, structured, and negotiated, and whether all material information about the transaction was disclosed. See Mills Acquisition Co. v. Macmillan, Inc., 559 A.2d 1261, 1280 (Del. 1989). Evidence of fair price rests on whether the price reflects a reasonably fair value, i.e., the value that a seller with access to all relevant information might reasonably accept from a buyer with access to all relevant information. See Reis, 28 A.3d at 466. Thus, the fair market value is the price that a willing seller and a willing buyer would agree after considering "all available uses and purposes" for the asset or property being sold. DFC Global Corp. v. Muirfield Value Partners, LP, 172 A.3d 346, 369 n.116 (Del. 2017). In estimating fair market value, one must assume the "highest, best, and most valuable use" for the property or asset. Metropolitan Mut. Fire Ins. Co. v. Carmen Holding Co., 220 A.2d 778, 780 (Del. 1966).
Prior to trial, the judge had determined that, as §§ 4.11, 7.2, and 7.3 of the operating agreement incorporated the "entire fairness" standard under Delaware law, the individual defendants were not permitted to dissolve MMS, and transfer to Altenex valuable assets belonging to MMS, without paying Petrucci his fair share of those assets. Thus, pursuant to § 4.11 of the agreement (where the terms of any transaction "shall be comparable to those available from third parties"), the individual defendants were required to establish that the transfer of MMS assets to Altenex was entirely fair; and, similarly, pursuant to § 7.3, the individual defendants had to show that Petrucci was paid his fair share of the MMS assets from the in kind distribution upon dissolution.
Upon careful review of the evidence, the trial judge concluded that each of the individual defendants violated their obligation to treat Petrucci with entire fairness in valuing the assets transferred from MMS to Altenex. Specifically, the judge found that the individual defendants failed to disclose to Petrucci all material information regarding the asset transfer from MMS to Altenex and failed to disclose the value of those assets. The judge also determined that the individual defendants did not pay Petrucci a fair price for his thirty percent share of the assets transferred from MMS to Altenex. We discern no error in the judge's findings of fact, and we agree with his conclusion that the individual defendants breached their contractual duty of entire fairness.
b. Unjust enrichment claim against Altenex. The trial judge found in favor of Petrucci on his unjust enrichment claim against Altenex, the only claim against Altenex that went to trial. Altenex filed motions for involuntary dismissal, pursuant to Mass. R. Civ. P. 41 (b) (2), 365 Mass. 803 (1974), at the close of Petrucci's case and again after the close of all evidence, seeking dismissal of the claim. Altenex argues that the judge erred in denying the motions.
Where the trial judge chose to apply the directed verdict standard to Altenex's evidence, we review the denial of Altenex's motions to determine whether "anywhere in the evidence, from whatever source derived, any combination of circumstances could be found from which a reasonable inference could be drawn in favor of the plaintiff" (quotation and citation omitted). Poirier v. Plymouth, 374 Mass. 206, 212 (1978). See M.G. v. G.A., 94 Mass. App. Ct. 139, 144 (2018).
Under Massachusetts law, compensation for unjust enrichment may be sought where, as here, a defendant has retained "money or property of another against the fundamental principles of justice or equity and good conscience" (quotation and citation omitted). Shea v. Cameron, 92 Mass. App. Ct. 731, 740 (2018). See also Demoulas, 424 Mass. at 544, 556 (ordering transfer of assets received by companies unjustly enriched by corporate opportunities wrongfully diverted by defendants).
The parties do not dispute that the unjust enrichment claim is governed by Massachusetts law. See note 7, supra.
As a preliminary matter, we agree with the trial judge that Petrucci's claim is not time barred. Where, as here, the "gist" of a claim is based on a breach of contract, the statute of limitations for breach of contract will apply to "avoid an illogical result" (quotation and citation omitted). Siebe, Inc. v. Louis M. Gerson Co., 74 Mass. App. Ct. 544, 557 (2009).
As to the merits, the judge did not err in determining that Altenex was unjustly enriched by receiving and retaining valuable assets from MMS in 2011, when thirty percent of those assets should have been distributed to Petrucci. We further agree that Altenex should be held jointly and severally liable for damages, along with interest, as awarded by the judge.
We also agree with Petrucci that our recent decision in Chang v. Winklevoss, 95 Mass. App. Ct. 202 (2019), is factually distinguishable.
Like the judge, we are not persuaded by the other arguments made by Altenex in support of its contention that this claim should have been dismissed.
5. Damages. The individual defendants paid Petrucci $300 for his thirty percent share of MMS. The judge determined that, to the extent that the individual defendants did not meet their duty under the "entire fairness" standard, Petrucci was entitled to rescissory damages of $300,000 on his breach of contract claim against the individual defendants and on his unjust enrichment claim against Altenex. Both Petrucci and the individual defendants contest the measure of the damages and the amount of damages awarded in the judgment. "The measure of damages is a question of law reviewed de novo on appeal ... but the amount of damages awarded is a factual issue reviewed on appeal under an abuse of discretion standard" (citation omitted). Twin Fires Inv., LLC v. Morgan Stanley Dean Witter & Co., 445 Mass. 411, 424 (2005).
Rescissory damages, awarded to restore a plaintiff to the position occupied before a defendant's wrongful acts, are "the monetary equivalent of rescission" and may be awarded only where a party is entitled to rescission but "the equitable remedy of rescission is impractical" (quotations and citation omitted). Matter of Orchard Enters. Stockholder Litig., 88 A.3d 1, 38 (Del. Ch. 2014) (Orchard Enters.). As Petrucci cannot challenge the dissolution of MMS, he can only challenge whether he was deprived of his share of the fair market value of MMS's assets. Thus, as Petrucci is not entitled to seek rescission of any subsequent sale of Altenex, he may not seek rescissory damages tied to the value of Altenex. See Americas Mining Corp. v. Theriault, 51 A.3d 1213, 1249-1252 (Del. 2012).
As Petrucci has shown that the individual defendants transferred valuable assets from MMS to Altenex without fairly compensating him, he is entitled to damages equal to his share of the value of those assets. See Matter of MAXXAM, Inc., 659 A.2d 760, 776 (Del. Ch. 1995) (rescissory damages awarded for wrongful misappropriation of assets "are measured by ascertaining the fair value of the assets to be transferred or restored as of the time of judgment"). "[R]escissory damages can be measured at the time of judgment, the time of resale, or at an intervening point when the stock had a higher value and remained in control of the disloyal fiduciary." Orchard Enters., 88 A.3d at 39. The judge determined, and we agree, that the highest value of the assets transferred from MMS to Altenex was at the time of the transfer in early July of 2011, and accordingly, valued those assets at $1.6 million. Applying a sixty percent discount rate suggested by Petrucci's valuation expert, the judge then quantified the present value of the assets as of July 2011 to be $1 million. He thus awarded Petrucci $300,000 in damages, exclusive of interest, i.e., thirty percent of $1 million, an amount far in excess of the $300 he was actually paid. We conclude that the judge's findings, based on ample evidence, were not clearly erroneous, and that the award of damages was proper. We further agree with the judge's decision to award the $300,000 jointly and severally against the individual defendants and Altenex.
Given our decision here, we need not address Petrucci's disgorgement argument.
Judgment affirmed.