Opinion
1784CV00442BLS1
07-24-2019
Paul MARTIN v. Gerald MARTIN, Jr. et al.
DECISION AND ORDER REGARDING PLAINTIFF’S MOTION TO HAVE GERALD MARTIN REMOVED AS MANAGER OF 823 EAST SIXTH STREET, LLC (DOCKET ENTRY NO. 69.0); PLAINTIFF’S MOTION TO ASSIGN ALL 823 EAST SIXTH STREET, LLC NET RENTS AND INCOME TO PAUL MARTIN AND SHARON MARTIN IN EQUAL AMOUNTS (DOCKET ENTRY NO. 70.0); PLAINTIFF’S MOTION FOR AN ACCOUNTING AND AUDIT OF 823 EAST SIXTH STREET, LLC’S FINANCIAL RECORDS (DOCKET ENTRY NO. 71.0); PLAINTIFF’S MOTION FOR CLARIFICATION ABOUT AND CONTROL OVER 823 LLC’S CONDOMINIUMS (DOCKET ENTRY NO. 72.0); PLAINTIFF’S MOTION TO PRECLUDE AND PREVENT DEFENDANTS FROM TAKING ANY ACTION WHICH WOULD ENCUMBER, TRANSFER, [OR] RESTRICT THE USE OF, OR IN ANY OTHER MANNER AFFECT THE USE, TITLE, AND/OR CURRENT STATUS OF ALL REAL PROPERTY OWNED BY 823 EAST SIXTH STREET, LLC (DOCKET ENTRY NO. 73.0)
Brian A. Davis, Associate Justice
Factual and Procedural Background
This action is a contentious fight between siblings and in-laws concerning their respective interests in 823 East Sixth Street, LLC ("823 LLC"), which owns certain valuable real estate located at 823 East Sixth Street, South Boston, Massachusetts (the "Property"). Plaintiff Paul Martin ("Plaintiff") brought suit against defendants Gerald Martin, Jr. ("Gerald"), and Sharon Martin (collectively, with Gerald, "Defendants") in February 2017 claiming that he holds a fifty percent (50%) interest in 823 LLC. Defendants, who are Plaintiff’s brother and sister-in-law, currently control 823 LLC in all respects. It has been and remains their position that Plaintiff holds no interest in 823 LLC, and that Plaintiff is not entitled to receive any monies generated from the operation or sale of the Property.
The Court previously bifurcated the trial of this case into two phases, the first of which ("Phase One") focused solely on the question of whether Plaintiff is a fifty percent owner/member of 823 LLC. The Court tried Phase One of this case, jury-waived, for six days in October and November 2018. In April 2019, the Court issued its resulting findings of fact and rulings of law (the "Phase One Decision") in which it held, in a nutshell, that Plaintiff does indeed hold a membership and ownership interest in 823 LLC pursuant to the terms of the written "Operating Agreement of 823 East Sixth Street, LLC (a Massachusetts Limited Liability Company)" that all of the parties signed in May 2004 (the "Operating Agreement"). The Operating Agreement unambiguously identifies Plaintiff as a "Member" of 823 LLC holding a "50%" interest. Operating Agreement, Schedule 1. The Operating Agreement also gives Plaintiff various ongoing rights vis-a-vis 823 LLC, including, but not limited to: (1) the right to review the "books and records of [823] LLC ... upon reasonable request ... during ordinary business hours" (id., Article VI, § 6.01); (2) the right to participate in determining when and how "LLC funds" will be distributed (id., Article IV, § 4.01); and (3) the right to receive an appropriate allocation of any "Profits" of 823 LLC that actually are distributed (id., Article IV, § 4.04(a)).
A fully-executed copy of the Operating Agreement was admitted in evidence at the Phase One trial as Exhibit 1 .
Since the Court issued its Phase One Decision, Defendants have continued to manage 823 LLC and the Property without the participation of, or any compensation to, Plaintiff. Dissatisfied with this state of affairs, Plaintiff has filed a series of motions that are intended to wrestle at least partial control of 823 LLC and the Property, and their associated economic benefits, from Defendants pending the final resolution of this action. Plaintiff’s motions are his: (1) Motion to Have Gerald Martin Removed as Manager of 823 East Sixth Street, LLC; (2) Motion to Assign All 823 East Sixth Street, LLC Net Rents and Income to Paul Martin and Sharon Martin in Equal Amounts; (3) Motion for an Accounting and Audit of 823 East Sixth Street, LLC’s Financial Records; (4) Motion for Clarification About and Control Over 823 LLC’s Condominiums; and (5) Motion to Preclude and Prevent Defendants from Taking Any Action Which Would Encumber, Transfer, [or] Restrict the Use of, or in Any Other Manner Affect the Use, Title, and/or Current Status of all Real Property Owned by 823 East Sixth Street, LLC (collectively, "Plaintiff’s Motions").
Defendants have filed two consolidated oppositions covering all of Plaintiff’s Motions. Consistent with the history of this litigation, Defendants yield no ground whatsoever in their opposition papers.
For example, the very first argument in Defendants’ Verified Opposition to, inter alia, Plaintiff’s Motion to Compel Production of Records is pugnaciously captioned,
By agreement of the parties, all of Plaintiff’s Motions have been submitted to the Court for resolution on the papers without oral argument. This decision and order constitutes the Court’s omnibus findings and rulings on those motions.
Discussion
The Court analyzes Plaintiff’s Motions as requests for various forms of preliminary injunctive relief. In order to obtain such relief, Plaintiff must show that: "(1) success is likely on the merits; (2) irreparable harm will result from denial of the injunction; and (3) the risk of irreparable harm to the moving party outweighs any similar risk of harm to the opposing party." Cote-Whitacre v. Department of Pub. Health, 446 Mass. 350, 357 (2006), citing Packaging Indus. Group, Inc. v. Cheney, 380 Mass. 609, 616-17 (1980). The decision whether to grant or deny a request for preliminary injunctive relief in any given case is a matter within the discretion of the trial court. See King v. Town Clerk of Townsend, 480 Mass. 7, 9 (2018).
The Court finds and concludes that Plaintiff has satisfied all of the requirements necessary to obtain at least some of the preliminary injunctive relief requested in his Motions. There can be little doubt that Plaintiff, having achieved total victory in Phase One, is very likely to succeed on the merits with respect to his claims against Defendants. Plaintiff also faces a significant risk of irreparable harm in that Defendants continue to completely ignore and deny him his rights as an owner/member of 823 LLC, including his right to participate in determining when and how "LLC funds" will be distributed (Operating Agreement, Article IV, § 4.01). See ER Holdings, Inc. v. Norton Co., 735 F.Supp. 1094, 1101 (D.Mass. 1990) ("ER Holdings, Inc. ") ("Courts have consistently recognized the irreparable harm associated with delay" in a party’s ability to exercise his or her corporate voting rights). See also Brigade Leveraged Capital Structures Fund Ltd. v. PIMCO Income Strategy Fund, 466 Mass. 368, 379 (2013), citing and quoting ER Holdings, Inc., 735 F.Supp. at 1100. Lastly, the balance of harms strongly favors Plaintiff in that merely requiring Defendants to live up to the terms of the Operating Agreement, pending the final resolution of this action, exposes them, in contrast, too little, if any, meaningful harm. See ER Holdings, Inc., 735 F.Supp. at 1102-03 (recognizing that "balance of harms clearly tips" in plaintiff’s favor "because its legitimate interest in enforcing ... by-laws- a contract made for the shareholders’ benefit- must trump the Board’s interest in circumscribing them").
Plaintiff filed similar motions, prior to the Phase One trial, to have Gerald removed as Manager of 823 LLC (see Docket Entry No. 21.0), and to require that all rents and other income generated by the Property be placed in escrow (see Docket Entry No. 22.0). Those motions were denied by the Court with no reasons stated. See Orders dated August 18, 2017. Plaintiff’s victory at the Phase One trial, however, provides good cause for Plaintiff and the Court to revisit these requests at the present time. See Genesis Technical & FM., Inc. v. Cast Navigation, LLC, 74 Mass.App.Ct. 203, 206 (2009) ("It is settled law that the power to reconsider an issue previously considered, whether by the same judge or another, remains in the court until final judgment") (citations and internal quotation marks omitted).
This Court previously found that Plaintiff’s October 2016 demand to Defendants for an accounting of "all monetary and other types of distributions" made by 823 LLC during the preceding three years was "largely ignored by Defendants." Phase One Decision at 9.
Order
Accordingly, Plaintiff’s Motions are ALLOWED IN PART. It is hereby ORDERED that, effectively immediately and until further order of this Court:
1. Defendants Gerald Martin, Jr. ("Gerald"), and Sharon Martin (collectively, with Gerald, "Defendants"), and all persons in active participation or concert with Defendants, are preliminarily enjoined and restrained from selling, conveying, assigning, pledging, transferring, encumbering, or otherwise disposing of the real property located at 823 East Sixth Street, South Boston, Massachusetts (the "Property");
2. Defendants shall fully and faithfully comply with any and all provisions of the "Operating Agreement of 823 East Sixth Street, LLC (a Massachusetts Limited Liability Company)," dated as of May 12, 2004 (the "Operating Agreement"), including, without limitation, Defendants’ obligations to:
(a) maintain "complete and accurate books and records" of 823 East Sixth Street, LLC ("823 LLC") on an ongoing basis in accordance with Article VI, § 6.01, of the Operating Agreement;
(b) provide plaintiff Paul Martin ("Plaintiff"), and/or his duly authorized representatives, the opportunity to review any and all past or present "books and records" of 823 LLC "upon reasonable request ... during ordinary business hours" in accordance with Article VI, § 6.01, of the Operating Agreement;
(c) permit Plaintiff to participate in determining when and how "LLC funds" will be distributed in accordance with Article IV, § 4.01, of the Operating Agreement; and
(d) not accept any payment or compensation from 823 LLC for any Manager’s or Member’s services as Manager or Member, except as expressly agreed to in writing by the Members of 823 LLC after the date of this Order in accordance with Article V, § 5.03, of the Operating Agreement.
3. Defendants promptly shall set up an escrow account at a Boston area bank (the "Escrow Account"), which Escrow Account shall be under the exclusive control of Defendants’ legal counsel;
4. Defendants shall deposit all monthly net income of 823 LLC (which shall be defined as all monthly income, in whatever form, generated by the Property and/or any other asset(s) of 823 LLC, minus the typical and ordinary business expenses associated with the operations of 823 LLC, including all typical and ordinary monthly expenses associated with the maintenance and operation of the Property, but not including any fee or other compensation to Gerald as Manager of 823 LLC) into the Escrow Account no later than the tenth (10th) day of each month;
5. Defendants shall provide Plaintiff, and/or his duly authorized representatives, the opportunity to review any and all statements and other books and records pertaining to the Escrow Account "upon reasonable request ... during ordinary business hours" in accordance with Article VI, § 6.01, of the Operating Agreement; and
6. Defendants shall make no withdrawal or disbursement from the Escrow Account, except as expressly agreed to in writing by the Members of 823 LLC after the date of this Order in accordance with Article IV, § 4.01, of the Operating Agreement.
In all other respects, Plaintiff’s Motions are DENIED WITHOUT PREJUDICE.
The Defendants aver, reassert, and continue to vehemently deny that any operating agreement for the 823 LLC was ever in force and effect, including, but not limited to, the Operating Agreement dated May 12, 2004, as alleged by [Plaintiff], and that Plaintiff ..., at no time whatsoever, was ever a Member of the 823 LLC.Defendant’s Verified Opposition at 4.