Opinion
C. A. PC-2018-7734
10-27-2020
JERROLD ROBINS, M.D., as Trustee of the Jerrold R. Robins Declaration of Trust dated June 29, 2005, as Amended, Plaintiff v. X-RAY ASSOCIATES, INC., Defendant
For Plaintiff: Robert Corrente, Esq. Timothy K. Baldwin, Esq. For Defendant: David A. Wollin, Esq. Amanda A. Garganese, Esq.
For Plaintiff: Robert Corrente, Esq. Timothy K. Baldwin, Esq.
For Defendant: David A. Wollin, Esq. Amanda A. Garganese, Esq.
DECISION
TAFT-CARTER, J.
Before this Court for decision is Jerrold Robins, M.D.'s (the Plaintiff or Dr. Robins) Motion for Partial Summary Judgment. The Defendant in this matter, X-Ray Associates, Inc. (the Defendant or XRA) objects to the Plaintiffs motion. The Court heard this motion remotely via WebEx on June 8, 2020. Jurisdiction is pursuant to Rule 56(c) of the Superior Court Rules of Civil Procedure.
I
Facts and Travel
Dr. Robins is a radiologist and former shareholder of XRA, a radiology practice which is incorporated and has its principal place of business in Rhode Island. (Am. Compl. ¶¶ 2-3.) Beginning in 2006, the shareholders of XRA executed a series of shareholder agreements. See id. ¶ 12. These agreements contained provisions relating to the calculations of the value of a departing shareholder's ownership interest. Id. On January 1, 2012, Plaintiff and other stockholders signed the Stockholders Agreement (2012 Stockholders Agreement), which the Plaintiff alleges prohibits the application of discounts for minority ownership and lack of marketability when calculating the value of a departing stockholder's ownership interest. Id. ¶ 9. Before signing the 2012 Stockholders Agreement, Dr. Robins went out on disability leave due to complications with a heart transplant. Id. ¶ 6. It is the 2012 Stockholders Agreement that is the subject of this lawsuit.
In March of 2015, Dr. Robins formally terminated his relationship with XRA by signing a Redemption Agreement prepared by XRA. Id. ¶ 8. Pursuant to the terms of the Redemption Agreement, XRA was required to value Plaintiffs ownership interest in accordance with the terms of the 2012 Stockholders Agreement. Id. ¶ 10. Dr. Robins maintains that XRA violated such terms and applied discounts for minority ownership and lack of marketability for when Dr. Robins redeemed his ownership interest. Id. Dr. Robins' ownership interest was valuated at $794, 946. Id. ¶ 9. He was paid the sum pursuant to a promissory note over sixty months. (Def.'s Obj. to PL's Mot. Partial Summ. J. (Def Obj.) at 27.) An initial payment of $15, 313.75 was disbursed to Dr Robins. Id. Dr. Robins alleges that the value of his interest was reduced by 43 percent after XRA applied a minority shareholder interest discount of 24 percent and non-marketable interest of 19 percent. See Am. Compl. ¶¶ 14-15.
Dr. Robins became aware that a colleague, Dr. John Caldarelli, had successfully contested the terms of the 2012 Stockholders Agreement in an arbitration proceeding against XRA. Id. ¶ 16. In PM-2019-1216, John Caldarelli, MD v. X-Ray Associates, Inc., the Arbitrator was called to make a determination as to the meaning of the term "Redemption Value" in the 2012 Stockholders Agreement. (PL's Mot. Partial Summ. J. at 7.) Specifically, Dr. Caldarelli argued in that proceeding that the provision precluded the application of discounts for lack of majority interest and lack of marketability. Id. Defendant argued, as it does similarly in the present case, that such a prohibition on discounting the redemption value only applies to when the parties invoke the three-appraiser resolution process. (Def. Obj. at 7.) Defendant contended in Dr. Caldarelli's case that, when the departing shareholders disagree with the valuation amount and decide to resolve the issue by each employing their own appraiser as well as a third-party neutral appraiser to determine the value, all three appraisers cannot consider "any potential diminution in value based on a Stockholder's ownership of less than a majority ... or restriction, if any on the transferability of the Shares." (Am. Compl. ¶ 13.)
In that proceeding, Dr. Caldarelli received an arbitration award against XRA. (PL's Mot. Partial Summ. J. at 7-8.) The award was confirmed by the Superior Court. Id. at 8. As a result, Dr. Robins commenced this action in this Court alleging that XRA breached the 2012 Stockholders Agreement by (1) calculating the value of his shares based on large minority and marketability discounts in direct contravention of the terms of the 2012 Stockholders Agreement, and (2) by offsetting against the value of his share of the proceeds from the sale of an XRA office two years after the agreed upon valuation date. (Am. Compl. ¶¶ 13, 18.) The first allegation is the sole issue Plaintiff wishes to resolve with his Motion for Partial Summary Judgment. The Court now renders its decision.
II
Standard of Review
When deciding a motion for summary judgment, the trial justice must keep in mind that it '"is a drastic remedy and should be cautiously applied.'" Steinberg v. State, 427 A.2d 338, 339-40 (R.I. 1981) (quoting Ardente v. Horan, 111 R.I. 254, 256-57, 366 A.2d 162, 164 (1976)). "Thus, '[s]ummary judgment is appropriate when, viewing the facts and all reasonable inferences therefrom in the light most favorable to the nonmoving party, the [C]ourt determines that there are no issues of material fact in dispute, and the moving party is entitled to judgment as a matter of law.'" Quest Diagnostics, LLC v. Pinnacle Consortium of Higher Education, 93 A.3d 949, 951 (R.I. 2014) (quoting Peloquin v. Haven Health Center of Greenville, LLC, 61 A.3d 419, 424-25 (R.I. 2013)). However, only when the facts reliably and indisputably point to a single permissible inference can this process be treated as a matter of law. Steinberg, 427 A.2d at 340. During a summary judgment proceeding, the Court does not pass upon the weight or credibility of the evidence. See DeMaio v. Ciccone, 59 A.3d 125, 130 (R.I. 2013).
When determining whether a genuine issue of material fact exists, the Court reviews "pleadings, affidavits, . . . and other similar matters ... in the light most favorable" to the nonmoving party. Saltzman v. Atlantic Realty Co., 434 A.2d 1343, 1345 (R.I. 1981). Although the nonmoving party "then bears the burden of proving with competent evidence the existence of a factual dispute," Paradis v. Zarrella, 683 A.2d 1337, 1339 (R.I. 1996), in ruling on an unopposed motion for summary judgment, the Court must nonetheless '"consider the motion on its merits, in light of the record as constituted, in order to determine whether judgment would be legally appropriate.'" Aguiar-Carrasquillo v. Agosto-Alicea, 445 F.3d 19, 25 (1st Cir. 2006) (quoting Mullen v. St. Paul Fire and Marine Insurance Co., 972 F.2d 446, 452 (1st Cir. 1992)) (ruling on an unopposed motion for summary judgment).
III.
Analysis
The Plaintiff requests that this Court enter partial summary judgment in his favor with respect to his allegation that the 2012 Stockholders Agreement prohibits the application of the discounts to his redemption of his ownership interest in XRA. (PL's Mot. Partial Summ. J. at 1.) Plaintiff argues that it is undisputed that the Redemption Agreement between Dr. Robins and XRA requires XRA to calculate Dr. Robins' interest in accordance with the 2012 Stockholders Agreement because that issue was already decided in PM-2019-1216, and thus the doctrine of collateral estoppel applies. Id. at 9-10. Defendant objects and argues that collateral estoppel is not applicable in this case and that it would violate the Defendant's constitutional right to a trial by jury. (Def Obj. at 27-38.) Further, Defendant argues that issues of material fact exist due to their defenses that Dr. Robins' claim is barred by waiver, release, and accord and satisfaction. Id. at 18.
A
Collateral Estoppel
Plaintiff argues that this Court should find no genuine dispute of material fact as to minority and marketability discounts because in PM-2019-1216 the Superior Court confirmed an arbitration award stating that XRA did act in contradiction to the "Redemption Value" terms as stated in the 2012 Stockholders Agreement, and thus the Defendant's defenses are barred by collateral estoppel. (PL's Mot. Partial Summ. J. at 11.) In addition to its constitutional argument, Defendant contends that the collateral estoppel argument fails as a matter of law. (Def. Obj. at 27.) Particularly, Defendant contends that Dr. Robins wrongfully asserts that he can use the Dr. Caldarelli arbitration decision to collaterally estop XRA from arguing in the present case that it did not breach the Redemption Agreement when the fair market value of Dr. Robins' shares included discounts for lack of marketability and control. Id. at 27-28. Defendant supports its argument by noting that the Rhode Island Supreme Court has refused to apply collateral estoppel to impose an arbitration decision against a defendant in a subsequent Superior Court lawsuit. Id. at 28 (citing Cranston Police Retirees Action Committee v. City of Cranston, 208 A.3d 557, 584-85 (R.I. 2019)).
"Under the doctrine of collateral estoppel, 'an issue of ultimate fact that has been actually litigated and determined cannot be re-litigated between the same parties or their privies in future proceedings.'" George v. Fadiani, 772 A.2d 1065, 1067 (R.I. 2001) (quoting CascoIndemnity Co. v. O'Connor, 755 A.2d 779, 782 (R.I. 2000)). Typically, the requirements for collateral estoppel are: "(1) the parties are the same or in privity with the parties of the previous proceeding; (2) a final judgment on the merits has been entered in the previous proceeding; (3) the issue or issues in question are identical in both proceedings." Foster-Glocester Regional School Committee v. Board of Review, 854 A.2d 1008, 1014 (R.I. 2004) (citing Zee v. Rhode Island Council 94, A.F.S.CM.K, AFL-CIO, Local 186, 796 A.2d 1080, 1084 (R.I. 2002)).
The doctrine of collateral estoppel is recognized in Rhode Island but is cautiously utilized due to its "harsh and unfair results." Casco Indemnity Co., 755 A.2d at 782. Moreover, the Supreme Court has stated that the doctrine of collateral estoppel '"cannot apply when the party against whom the earlier decision is asserted did not have a 'full and fair opportunity' to litigate that issue in the earlier case."" Id. at 782-83 (quoting Allen v. McCurry, 449 U.S. 90, 95 (1980)).
In Cranston Police Retirees Action Committee, cited supra, the plaintiff retirees brought an action challenging the defendant's adoption of two 2013 ordinances. Cranston Police Retirees Action Committee, 208 A.3d at 567. In that case, the plaintiffs alleged in both their complaint and summary judgment motion that a prior arbitration decision, which the Superior Court had affirmed, prevented the defendants from arguing the disputed ordinances on the grounds of collateral estoppel. Id. at 583. Not only did the Superior Court reject the retirees' request to use a previous arbitration award argued by another party based on the grounds of collateral estoppel, the Rhode Island Supreme Court also, on appeal, rejected the retirees' argument because a prior arbitration decision could not bind defendants when the defendants did not have a full and fair opportunity to litigate that issue in the earlier cases. Id. at 585 n.15.
The Supreme Court in Cranston Police Retirees Action Committee recognized that the United States Supreme Court has allowed a litigant who was not a party to the first case to '"use collateral estoppel 'offensively' in a new * * * suit against the party who lost on the decided issue in the first case.'" Id. at n. 15 (quoting Allen, 449 U.S. at 94-95). However, the Court pointed out that the United States Supreme Court has "repeatedly recognized" a limitation on the offensive use of collateral estoppel when the party in the previous action did not have a "full and fair opportunity to litigate that issue in the earlier case." Id. (internal quotations omitted). Thus, the Court concluded that, even though the City of Cranston and its officials were defendants in the prior arbitration and the current lawsuit, the defendants "did not have an opportunity to defend their legislative actions through the litigation process . . ." Id.
The Rhode Island Supreme Court ultimately ruled that the plaintiffs in Cranston Police Retirees Action Committee had not properly raised the issue of collateral estoppel. Cranston Police Retirees Action Committee, 208 A.3d at 585. However, the Court concluded that, even if the plaintiffs properly alleged collateral estoppel, the doctrine would not have applied in that case. Id. at 585 n.15.
Here, Plaintiff asserts that all the requirements of collateral estoppel are met because (1) XRA is the same party in this proceeding and the previous Dr. Caldarelli arbitration; (2) XRA had the opportunity to and did litigate the issue of whether the 2012 Stockholders Agreement authorized discounts for minority ownership and lack of marketability because it was given an opportunity to brief the issue and had three days of evidentiary hearings; and (3) XRA lost on the issue and the Superior Court entered a final judgment confirming the arbitration award. (PL's Reply Mem. Supp. Mot. Partial Summ. J. (PI. Reply Mem.) at 19.) Plaintiff further relies on Casco Indemnity Co., cited supra, for the proposition that Rhode Island courts have previously held "when an arbitration award is reduced to a final judgment in the Superior Court, the doctrine of collateral estoppel may be invoked in a subsequent proceeding." Casco Indemnity Co., 755 A.2d at 782. While Dr. Caldarelli's arbitration award was affirmed by the Superior Court in PM-2019-1216, Casco Indemnity Co. is distinguishable from this case because there the Court applied collateral estoppel to a subsequent arbitration decision and not a subsequent lawsuit like in the present case before this Court. See id. ("The sole issue decided by the trial justice in this declaratory judgment action was whether the first arbitrator's determination that O'Connor was 50 percent liable for the accident should be binding in the second arbitration.").
Plaintiff points to other cases such as Foster-Glocester Regional School Committee, cited supra, where the Rhode Island Supreme Court held that the District Court should have applied collateral estoppel to the arbitrator's factual findings and "ruled that [the party] was precluded from relitigating the issue . . ." Foster-Glocester Regional School Committee, 854 A.2d at 1017. The Court in that case again pointed out that "a court should not apply the doctrine 'mechanically' in situations in which it would lead to inequitable results." Id. (citing Casco Indemnity Co., 755 A.2d at 782). In the instant case, like in Cranston Police Retirees Action Committee, cited supra, XRA did not have an opportunity to defend itself through the "litigation process." See Cranston Police Retirees Action Committee, 208 A.3d at 585 n.15.
Further, "[issue] [p]reclusion may be withheld when the party against whom it is invoked can avail himself of procedures in the second action that were not available to him in the first action and that may have been significantly influential in determination of the issue." Restatement (Second) Judgments § 29, cmt. d. There are procedures available now in the instant case, such as discovery, that were not available to XRA in the previous arbitration involving Dr. Caldarelli. See id. (stating that "such procedures as discovery devices" could be sufficient to withhold preclusion). Accordingly, Plaintiff cannot benefit from the application of non-mutual offensive collateral estoppel as a matter of law because XRA did not have a "full and fair opportunity to litigate" the issue of Plaintiff s allegation that XRA breached the 2012 Stockholders Agreement by calculating the value of his shares based on large minority and marketability discounts in direct contravention of the terms of the 2012 Stockholders Agreement. See Cranston Police Retirees Action Committee, 208 A.3d at 585 n.15.
The Court recognizes that Defendant presents an argument that allowing Plaintiff to use non-mutual collateral estoppel offensively would violate its constitutional right to a jury trial. However, since this Court has decided that the Plaintiff cannot assert this type of collateral estoppel as a matter of law, it need not address this argument.
B
Waiver & Release
In addition to the opposition of the use of collateral estoppel, the Defendant argues that issues of material fact exist regarding the question of whether Dr. Robins waived his rights to challenge the application of discounts by failing to appeal the accountant's valuation report as provided by Section 1 of the 2012 Stockholders Agreement because Dr. Robins reviewed the valuation report with the accountant and proceeded to accept the discounts in the valuation. See Sturbridge Home Builders, Inc. v. Downing Seaport, Inc., 890 A.2d 58, 65 (R.I. 2005) ("[W]aiver may be proved indirectly by facts and circumstances from which intention to waive may be clearly inferred'').
Section 1 of the 2012 Stockholders Agreement establishes a two-step process for determining the Redemption Value based on the "fair-market value" of the stockholder's shares and for challenging either the valuation or the selection of the appraiser giving the valuation. If the Stockholder is not satisfied with the determination of Redemption Value of the Shares, the Stockholder and Defendant are required to engage in each selecting their own appraiser and a third neutral appraiser, and that third appraiser's decision is final and binding on the parties.
Further, Defendant argues that Dr. Robins affirmed his waiver to challenge the discounting after he "released" XRA from any claims by signing the Redemption Agreement. (Def Obj. at 22.) Defendant supports this argument by stating the clear language provided in Section 3(a) of the Redemption Agreement supports this position. Id. Defendant contends that the language in the Redemption Agreement effectively acts as a broad release of all previous agreements made between XRA and Dr. Robins. Id. According to Defendant, the only type of action that Dr. Robins could bring against XRA is for any "obligations" to which Robins is owed and that XRA did not carry out. Id. at 23. Thus, Defendant argues that the "obligation" should not include XRA to avoid discounting in the valuation of Plaintiff s shares. Id. In addition, Defendant asserts that it never made such a representation to Plaintiff that it would not avoid any discounts during valuation in the 2012 Stockholders Agreement. Id. at 24.
Here, Plaintiff in fact admits that he "agrees with XRA that its affirmative defenses of waiver and release present genuine issues of material fact that are ripe for trial." (PI. Reply Mem. at 12.) Therefore, this Court will not grant summary judgment on either of these issues because both parties assert that issues of material fact remain surrounding both of Defendant's affirmative defenses of waiver and release.
C
Accord and Satisfaction
Finally, Defendant asserts that there is a genuine issue of material fact with respect to the issue of whether Plaintiff s claim is barred by the common law principle of accord and satisfaction. (Def Obj. at 26.) Defendant explains that the Redemption Agreement supersedes all prior agreements that Dr. Robins had with XRA, including the 2012 Stockholders Agreement. Id. at 27. Specifically, Sections 1, 3, 4, and 7 of the Redemption Agreement act as an '"accord and satisfaction[, ]"' i.e., '"an agreement between two parties to give and accept something in satisfaction of a right of action which one has against the other, which when performed is a bar to all actions.'" Soares v. Langlois, 934 A.2d 806, 809 (R.I. 2007) (quoting Lamoureaux v. Merrimack Mutual Fire Insurance Co., 751 A.2d 1290, 1293 (R.I. 2000)). Plaintiff asserts that the Court does not need to revisit this theory, as the Defendant lost on this argument during its motion to dismiss. (PI. Reply Mem. at 13.) Further, the Plaintiff argues that, just like the waiver and release claims, accord and satisfaction also could be raised as an affirmative defense at trial. Id.
"[T]he 'doctrine of accord and satisfaction provides that when two parties agree to give and accept something in satisfaction of a right of action which one has against the other, and that agreement is performed, the right of action is subsequently extinguished.'" Weaver v. American Power Conversion Corp., 863 A.2d 193, 197 (R.I. 2004) (quoting ADPMarshall, Inc. v. Brown University, 784 A.2d 309, 313 (R.I. 2001)). "[W]hether a new agreement is a substituted contract operating as an immediate discharge ... is wholly a question of intention, to be determined by the usual processes of interpretation, implication, and construction." Id. at 198 (quoting 6 Corbin on Contracts, § 1293 at 190 (1962)). Thus, this Court should look to extrinsic evidence "to determine the intent of the parties to a substituted contract or an accord and satisfaction . . ." Id.
Here, Section 4 of the Redemption Agreement states: "Each of the Company Agreements is hereby terminated in all respects with respect to Doctor as of the Effective Date. All of the parties hereto hereby confirm that all agreements, obligations and understandings among the parties with respect thereto are hereby terminated in all respects, except as provided herein." (Def Obj., Exhibit 24.) The plain language of the Redemption Agreement states that it terminates all prior agreements of the parties. However, for an accord and satisfaction to extinguish Plaintiffs right of action, Defendant must have fully performed the substitute contract, which, here, would be the Redemption Agreement. See Soares, 934 A.2d at 810.
Plaintiff claims that XRA did not fully perform under the Redemption Agreement because XRA failed to calculate his value of shares in accordance with the 2012 Stockholders Agreement. This Court has already held that Plaintiff is barred from using non-mutual offensive collateral estoppel as to this allegation. Therefore, there is a genuine issue of material fact with respect to the calculations, and thus it cannot be determined at this time whether XRA fully performed under the Redemption Agreement such that an accord and satisfaction occurred.
IV
Conclusion
The Court therefore denies Plaintiffs Motion for Partial Summary Judgement. Counsel shall prepare the appropriate order for submission.