Opinion
1784CV03547BLS1
10-09-2018
FBT EVERETT REALTY, LLC v. Attorney Paul FELDMAN et al.
DECISION AND ORDER REGARDING DEFENDANTS’ MOTION TO DISMISS CHARLES LIGHTBODY’S FIRST AMENDED THIRD-PARTY COUNTERCLAIMS COMPLAINT (DOCKET ENTRY NO. 21.0)
Brian A. Davis, Associate Justice of the Superior Court
This case is, at its core, a legal malpractice action arising out of the sale of a parcel of land in Everett, Massachusetts (the "Property") by plaintiff FBT Everett Realty, LLC ("FBT") to an affiliate of Wynn Resorts ("Wynn") for use as the site of a new gambling casino. Plaintiffs The DeNunzio Group, LLC, Dustin DeNunzio ("Mr. DeNunzio"), and Anthony Gattineri ("Mr. Gattineri" or, collectively with The DeNunzio Group, LLC, and Mr. DeNunzio, the "Other Plaintiffs") each own an interest in FBT. At one time, third-party defendant Charles Lightbody ("Mr. Lightbody") also held an interest in FBT. It is alleged that Mr. Lightbody, who has a criminal record, sold his interest in FBT in mid-2012 or early 2013 (depending upon who you ask) based on his belief, and the belief of the Other Defendants, that his continuing involvement in FBT would impede Wynn’s ability to obtain a license from the Massachusetts Gaming Commission (the "Commission") to operate a casino on the Property. It is further alleged that FBT, Lightbody, and the Other Plaintiffs obtained their understanding about the danger allegedly posed by Mr. Lightbody’s ownership interest in FBT from defendants Paul Feldman ("Attorney Feldman") and his law firm, Davis, Malm & D’Agostine, P.C. ("Davis Malm" or, collectively with Attorney Feldman, "Defendants"), who represented FBT and the Other Plaintiffs in their real estate dealings with Wynn.
Word of Mr. Lightbody’s possible ownership interest (and the purported concealment of that interest) eventually did trigger an investigation by the Commission and the Massachusetts State Police (the "Investigation") and the filing of federal criminal charges against Mr. DeNunzio, Mr. Gattineri, and Mr. Lightbody concerning the Property. The Investigation also triggered a demand by Wynn that FBT reduce the selling price for the Property by $40 million, which FBT ultimately agreed to do.
All three were acquitted at trial.
The Commission subsequently issued a "Decision Regarding the Determination of Premises for the Gaming Establishment for Mohegan Sun MA, LLC and Wynn MA, LLC" in May 2014 (the "Determination"), which expressly found that the members of FBT were not "parties in interest" with respect to Wynn’s proposed gaming license and, therefore, Mr. Lightbody’s ownership interest in FBT did not, in fact, endanger Wynn’s ability to obtain the Commission’s approval to operate a casino on the Property.
The Determination is dated April 28, 2014, but the parties appear to be in agreement that it was publicly released by the Commission on or about May 15, 2014.
Three and a half years later, FBT and the Other Plaintiffs commenced this legal malpractice action against Feldman and Davis Malm. See Complaint and Jury Demand, dated November 1, 2017 (Docket Entry No. 1.0). The gist of their claims is that Feldman and Davis Malm were negligent in advising FBT and the Other Plaintiffs that Mr. Lightbody’s ownership interest in FBT posed a threat to Wynn’s ability to acquire a gaming license for the Property, and that the sale price for the Property was needlessly reduced by $40 million as a result. Feldman and Davis Malm have respond to FBT and the Other Plaintiffs’ claims, in part, by asserting counterclaims against The DeNunzio Group, LLC, and Mr. DeNunzio and Mr. Gattineri individually, for contribution and misrepresentation, arguing, in part, that they "failed to provide timely and accurate information to Attorney Feldman" and "acted tortiously as to FBT and each other ..." Answer, Counterclaims and Jury Demand of the Defendants (Docket Entry No. 6.0), ¶¶ 15 and 17(a). Feldman and Davis Malm also have filed a third-party complaint against Mr. Lightbody asserting the same claims against him. Third-Party Complaint (Docket Entry No. 7.0), ¶¶ 33-39. Mr. Lightbody, in turn, has fired back with his own set of counterclaims against Attorney Feldman and Davis MaIm alleging negligence (Count I), breach of fiduciary duty (Count II), violation of G.L.c. 93A (Count III), and vicarious liability (Count IV). First Amended Answer, Counterclaims, Cross claim and Jury Demand of the Third-Party Defendant (the "Lightbody Counterclaims," Docket Entry No. 16.0).
Attorney Feldman and Davis Malm also have asserted similar counterclaims against Paul Lohnes, another part owner of FBT. However, Mr. Lohnes’ involvement is irrelevant to Defendants’ Motion to Dismiss and, therefore, ignored for purposes of this Decision and Order.
The foregoing summary fairly describes the current procedural positions of the parties. Presently before the Court is Attorney Feldman and Davis Malm’s motion to dismiss Mr. Lightbody’s counterclaims on statute of limitations grounds (the "Motion to Dismiss," Docket Entry No. 21.0). Attorney Feldman and Davis Malm argue, in the first instance, that all of Mr. Lightbody’s counterclaims are time-barred because Mr. Lightbody knew or should have as early as December 2013, when the Commission issued a "Report of Suitability of Applicant Entities and Individual Qualifiers" (the "December 2013 Report"), that he had been harmed as a result of Defendants’ purported negligence. See Memorandum of Law in Support of Defendants’ Motion to Dismiss at 15-17. Alternatively, Attorney Feldman and Davis Malm argue that Mr. Lightbody’s tort-based counterclaims are time-barred because Mr. Lightbody knew or should have known no later than May 2014, when the Commission issued its Determination expressly finding that the owners of FBT were not "parties in interest" with respect to Wynn’s proposed gaming license, that he had been harmed as a result of Defendants’ purported negligence. Id. at 16-17. Lastly, Attorney Feldman and Davis Malm argue that Mr. Lightbody’s G.L.c. 93A counterclaim necessarily fails because he has alleged nothing more than "ordinary negligence" on Attorney Feldman’s part. Id. at 19-20.
A copy of the December 2013 Report, which is referenced in the parties’ pleadings, is appended to Defendants’ Supplemental Memorandum (Docket Entry No. 28.0).
Mr. Lightbody, not surprisingly, opposes Attorney Feldman and Davis Malm’s Motion to Dismiss. He claims that he did not learn of Defendants’ alleged malpractice and the harm it caused him until late 2015, when he purportedly first heard of the Commission’s May 2014 Determination. Charles Lightbody’s Opposition to the Law Firm Defendants’ Motion to Dismiss, dated May 29, 2018, at 5-6. He further argues that questions as to whether he "should have known" of Defendants’ alleged negligence and the resulting harm at an earlier time "are for the fact finder," and are not appropriate for resolution on a motion to dismiss. Id. at 1, 4-8.
The Court conducted a hearing on Defendants’ Motion to Dismiss on August 14, 2018. At the hearing, the Court gave the parties leave to make additional written submissions concerning the potential applicability of G.L.c. 260, § 36 to Mr. Lightbody’s counterclaims. Those submissions now have been received and reviewed by the Court. Upon consideration of the motion papers submitted by the parties and the oral arguments of counsel, Defendants’ Motion to Dismiss is ALLOWED IN PART to the extent, and for the reasons, summarized briefly below.
Massachusetts law holds that "[t]he statute of limitations does not begin to run on a claim of malpractice until the [claimant] knows or reasonably should know that he or she has been harmed by the [opposing party’s] conduct." Williams v. Ely, 423 Mass. 467, 473 (1996). Where a question exists as to whether a claimant knew or should have known of the harm caused by an opposing parties’ conduct, it is the claimant’s burden to "demonstrat[e] that [he or she] did not know of the [harmful conduct] within the statute of limitations and that ‘in the exercise of reasonable diligence, [he or she] should not have known.’ " Albrecht v. Clifford, 436 Mass. 706, 715 (2002) (quoting Friedman v. Jablonski, 371 Mass. 482, 487 (1976)). As a general matter, facts that are easily discovered or that can be determined from an examination of public records are deemed to be "known" or "reasonably knowable." See, e.g., Friedman, 371 Mass. at 486 (in action involving alleged misrepresentation concerning right of way, "[t]he plaintiffs could have conducted a title search, employing an attorney acting on their behalf, and, in determining when the cause of action accrued against these defendants, the plaintiffs must take the consequences of any failure to do so or of any omission on the part of their attorney"). See also Anthony’s Pier Four, Inc. v. Crandall Dry Dock Engineers, Inc., 396 Mass. 818, 825 n.9 (1986) (declining to apply discovery rule to claim that defendant misrepresented qualifications of project workers where alleged breach was "a fact that the plaintiff could have ascertained at the time of construction ... by inquiring as to [the workers’ and subcontractors’] qualifications"); Graveline v. BayBank Valley Trust Co., 19 Mass.App.Ct. 253, 254 (1985) (declining to apply discovery rule to claim that defendant misrepresented age of building’s roof where the age of the roof "could have been determined by [an] inspection"). Whether a claimant actually knew or should have known a particular fact at a particular point in time typically is "a factual issue that should not only survive a motion to dismiss, but be decided by the trier of fact." Ortiz v. Mass. Med. Services, Inc., 86 Mass.App.Ct. 1116, 2014 WL 5326511, at *2 (Oct. 21, 2014) (Rule 1:28 decision). "However, a judge can still determine, as matter of law, whether the plaintiff’s complaint demonstrate[s] sufficient heft to plausibly show that the plaintiff’s lack of knowledge was objectively reasonable." Id. Cf. Melrose Housing Auth. v. New Hampshire Ins. Co., 402 Mass. 27, 31 n.4 (1988) ("Inherent unknowability is not a fact, but rather a conclusion to be drawn from the facts").
The Supreme Judicial Court stated elsewhere in Williams that the "knew or should have known" standard is "no different from" the "inherently unknowable" test discussed in other, prior decisions. 423 Mass. at 473 n.7. See, e.g., Melrose Housing Auth. v. New Hampshire Ins. Co., 402 Mass. 27, 31-32 & n.5 (1988); Olsen v. Bell Tel. Lab., Inc., 388 Mass. 171, 174-75 (1983).
Mr. Lightbody alleges, if only indirectly, that he had an attorney-client relationship with Attorney Feldman and Davis Malm as of late 2012. See, e.g., Lightbody Counterclaims, ¶ 13 (detailing meeting between FBT members and Attorney Feldman on December 12, 2012, at which "Attorney Feldman instructed Lightbody, as a convicted felon, that he needed to divest himself of his interest in FBT because it was required under the Massachusetts Expanded Gaming Act ..."). Mr. Lightbody does not allege or contend, however, that he continued to have an attorney-client relationship with Attorney Feldman and Davis Malm after he purportedly conveyed his interest in FBT to Mr. Gattineri in January 2013. Id., ¶ 30. For this reason, the parties have not argued, and the Court has not applied, the more stringent rules that govern the accrual of claims in the context of an ongoing fiduciary relationship. See, e.g., Hays v. Ellrich, 471 Mass. 592, 602 (2015) ("Where a fiduciary relationship exists, the failure adequately to disclose the facts that would give rise to knowledge of a cause of action constitutes fraudulent conduct and is equivalent to fraudulent concealment," with the result that "the statute of limitations clock begins to run only when the plaintiff has actual knowledge ... of the facts giving rise to his cause of action, i.e., the facts which the fiduciary had failed to disclose") (internal quotation marks and citations omitted).
In this case, the undisputed factual record set out in the parties’ pleadings establishes that, on May 15, 2014, the Commission publicly released its Determination announcing that the members of FBT were not "parties in interest" with respect to Wynn’s proposed gaming license. Given the legal hot water that Mr. Lightbody and the Other Plaintiffs understood they were in at that time (i.e., they were the subjects of an ongoing criminal investigation focused on Mr. Lightbody’s interest in the Property), the Court can only conclude that Mr. Lightbody knew or should have known, no later than May 2014, of Defendants’ alleged malpractice and the harm it purportedly caused him. Certainly any reasonable person in Mr. Lightbody’s position would have, or should have recognized, no later than May 2014, that the Commission’s Determination was directly contrary to Attorney Feldman’s alleged advice that Mr. Lightbody’s continued ownership interest in FBT would impede Wynn’s ability to obtain a license to operate a casino on the Property, and also recognized that all of the resulting (and purportedly illegal) efforts to transfer Mr. Lightbody’s interest to Mr. Gattineri had been unnecessary. The Court makes these rulings as a matter of law because no other conclusion is "objectively reasonable." Ortiz, 2014 WL 5326511, at *2.
The Court has considered and rejects, at least for purposes of Defendants’ Motion to Dismiss, Defendants’ alternative argument that Mr. Lightbody knew or reasonably should have known that he had been harmed by Defendants’ alleged malpractice when the Commission issued its December 2013 Report. Defendants claim that Mr. Lightbody should have deduced from the Commission’s failure to identify him in the December 2013 Report as an "individual qualifier" that his involvement in FBT did not endanger Wynn’s ability to obtain a gaming license for the Property. The December 2013 Report, however, did not imply that Mr. Lightbody’s involvement posed no risk for Wynn. To the contrary, the Report expressly stated that the "suspected misconduct" of FBT and its members "posed a potential hurdle to [Wynn’s] suitability" for a gaming license. December 2013 Report at 88. The Court is unable to conclude, as a result, that the Report did, or reasonably should have, put Mr. Lightbody on notice of Defendants’ alleged malpractice.
Because Mr. Lightbody knew or reasonably should have known of Defendants’ alleged malpractice and the harm it purportedly caused him no later than May 2014, he is precluded by the three-year statute of limitations for "[a]ctions of contract or tort for malpractice, error or mistake against attorneys" established by G.L.c. 260, § 4, from obtaining an affirmative recovery on Count I (negligence) and Count II (breach of fiduciary duty) of his counterclaims against Defendants. All of Mr. Lightbody’s counterclaims are compulsory, however, in that they plainly "arise[ ] out of the transaction or occurrence that is the subject matter" of Defendants’ third-party claims against Mr. Lightbody (i.e., Attorney Feldman and Davis Malm’s representation of FBT and its members with respect to the proposed sale of the Property to Wynn). See Mass.R.Civ.P. 13(a). See also Nat’l Lumber Co. v. Canton Inst. for Savings, The Bank of Canton, 56 Mass.App.Ct. 186, 188 (2002) ("For purposes of determining whether a counterclaim is compulsory or permissive, the word ‘transaction’ [as used in Rule 13(a) ] should not be construed narrowly or technically, but should be construed in a sense to effectuate the settlement in one proceeding of controversies so closely connected as appropriately to be combined in one trial in order to prevent duplication of testimony, to avoid unnecessary expense to the parties and to the public, and to expedite the adjudication of suits") (internal quotation marks and citation omitted). As such, Counts I and II of Mr. Lightbody’s counterclaims are subject to G.L.c. 260, § 36, which provides that "a counterclaim arising out of the same transaction or occurrence that is the subject matter of the plaintiff’s claim, to the extent of the plaintiff’s claim, may be asserted without regard to the provisions of law relative to limitations of actions." This means that, notwithstanding the fact that Counts I and II of Mr. Lightbody’s counterclaims were not timely filed, he still may pursue these counterclaims against Defendants, but "only to the extent" of Defendants’ claims against him. See Bernstein v. Gramercy Mills, Inc., 16 Mass.App.Ct. 403, 409 (1983) (a counterclaim saved from dismissal under G.L.c. 260, § 36, "corresponds to ‘recoupment’ in the pre-Rules practice" and "can go only to the extent of the plaintiff’s claim") (internal quotation marks and citations omitted).
Pursuant to G.L.c. 260, § 36, Mr. Lightbody’s counterclaims relate back to filing date of Defendants’ third-party complaint against him (i.e., December 22, 2017), which is more than three years from the date on which Mr. Lightbody’s malpractice claims first accrued. See Elms v. Osgood, 1998 WL 1284174, at *2 (Mass.Super. May 13, 1998) (holding that counterclaim against defendant-in-counterclaim was "technically an original complaint" for purposes of G.L.c. 260, § 36).
Count III of Mr. Lightbody’s counterclaims, conversely, alleges a violation of G.L.c. 93A by Attorney Feldman that is governed by the four-year statute of limitations for "[a]ctions arising on account of violations of any law intended for the protection of consumers" established by G.L.c. 260, § 5A. Contrary to Defendants’ contentions, Mr. Lightbody’s allegations against Attorney Feldman go well beyond "ordinary negligence" and are sufficient, on their face, to survive a motion to dismiss. See, e.g., Lightbody Counterclaims, ¶¶ 35-40 (describing Attorney Feldman’s alleged falsification of documents concerning the sale of Mr. Lightbody’s interest in FBT to Mr. Gattineri). Additionally, because Mr. Lightbody filed his counterclaims against Defendants more than three, but less than four years after the counterclaims first accrued in May 2014, Count III is not time-barred in any way and may be pursued by Mr. Lightbody for its full value, if any.
Count IV of Mr. Lightbody’s counterclaims alleges that Davis Malm is vicarious liability for Attorney Feldman’s conduct. Because this count is merely derivative of Counts I through III of Mr. Lightbody’s counterclaims against Attorney Feldman, it necessarily follows the fortunes of those particular counts for statute of limitations purposes. See Elias v. Unisys Corp., 410 Mass. 479, 481 (1991) (under "principles of vicarious liability," the "liability of the principal arises simply by the operation of law and is only derivative of the wrongful act of the agent"). Or, put another way, Mr. Lightbody, may pursue his counterclaim against Davis Malm based on Attorney Feldman’s alleged negligence and/or breach of fiduciary duty only to the extent of Defendants’ claims against him, but he may pursue his counterclaim against Davis Malm based on Attorney Feldman’s alleged violation of G.L.c. 93A for its full value, if any.