Opinion
21-P-460
04-08-2022
The ROBINSON GREEN BERETTA CORPORATION & another v. ADLER POLLOCK & SHEEHAN P.C. & others.
MEMORANDUM AND ORDER PURSUANT TO RULE 23.0
Plaintiff The Robinson Green Beretta Corporation (plaintiff or corporation) appeals from a judgment of the Superior Court dismissing its civil conspiracy and legal malpractice claims against defendants Adler Pollock & Sheehan P.C. (APS) and Sally Dowling. See Mass. R. Civ. P. 12 (b) (6), 365 Mass. 754 (1974). Concluding that the plaintiff failed to allege the underlying tortious conduct on which the conspiracy claim depended and has failed to allege sufficient facts to support its claim that the defendants breached any fiduciary duty to the corporation, we affirm.
Additional claims by David L. DeQuattro, personally, and against Joseph R. Beretta, were dismissed and are not at issue in this appeal.
Background. We summarize the well-pleaded factual allegations of the plaintiffs’ first amended complaint, taking the facts as true, and considering the documents on which the plaintiff relied in framing it. See Boston Med. Ctr. Corp. v. Secretary of the Executive Office of Health & Human Servs., 463 Mass. 447, 450 (2012) (pleadings and documents referenced in complaint and provided to motion judge considered for rule 12 motion); Golchin v. Liberty Mut. Ins. Co., 460 Mass. 222, 224 (2011) (where "plaintiff had notice of [the extrinsic] documents and relied on them in framing the complaint," 12 [b] [6] motion not converted to one for summary judgment); Iannacchino v. Ford Motor Co., 451 Mass. 623, 636 (2008) (motion to dismiss standard).
The corporation was an architectural firm incorporated in Rhode Island with an office in Taunton. At all relevant times, APS and Dowling, an attorney with APS, represented the corporation. Joseph R. Beretta, who was not an architect, was the corporation's president from 1987 until December 31, 2019, and before January 9, 2009, owned 100 percent of the corporation's preferred stock and a majority of its common stock.
In 2005, the corporation's vice presidents (including DeQuattro and Jeff A. Hatcher) began negotiating with Beretta to transition the corporation to an architect-owned business. To that end, on January 9, 2009, DeQuattro, Hatcher, and Beretta (then the three members of the corporation's executive committee) signed a transition of ownership agreement (2009 agreement). Upon execution of the 2009 agreement, Beretta sold all 400 shares of preferred stock back to the corporation. As to Beretta's remaining shares of common stock, the 2009 agreement established a three-year window (until January 9, 2012) for "[n]ew [i]nvestors" -- defined to include DeQuattro and Hatcher -- to purchase the shares for a total of $560,000. If the shares were not sold within that window, then the 2009 Agreement required Beretta to sell his remaining shares back to the corporation by his sixty-fifth birthday on May 5, 2016, at fair market value.
Beretta's remaining shares were not sold by January 9, 2012, and thereafter DeQuattro approached Beretta to negotiate the purchase of the rest of Beretta's shares in the corporation so that DeQuattro would become its majority shareholder. On March 16, 2015, Beretta contacted Dowling to inform her that he did not want to relinquish majority control of the corporation. Dowling responded by e-mail and informed Beretta that under the 2009 agreement, "[he had] already [given] away control of the business" and was required to sell his stock to the company on his sixty-fifth birthday. Dowling did not disclose this communication to the other members of the corporation's executive committee, DeQuattro and Hatcher.
DeQuattro, who was a veteran, sought to qualify the corporation as a veteran-owned business.
The plaintiffs allege that between March 16, 2015 and March 29, 2016, Beretta and Dowling had additional communications that were not shared with the executive committee. With one exception, the complaint does not specify the subject matter of those communications. The exception is an e-mail exchange on March 30, 2015 (and allegedly continuing into June 12, 2015), in which the plaintiffs claim that Beretta sought Dowling's advice about his entitlement to a dividend, "intend[ing] to increase his ownership position in [the corporation] prior to selling his [s]hares, and to buy preferred stock, ... in order to maintain control of [the corporation]."
On March 31, 2016, the executive committee (Beretta, DeQuattro, and Hatcher) approved the sale of Hatcher's shares to DeQuattro. The plaintiffs allege that at that time, DeQuattro and Hatcher "were unaware of the requirements of the 2009 [a]greement" to which they were signatories, and Dowling did not remind them of those requirements. The next day, however, Beretta, DeQuattro, and Hatcher signed a "written consent of the stockholders" prepared by Dowling, agreeing to the transfer of Hatcher's shares of common stock in the corporation to DeQuattro "notwithstanding the terms and conditions of that certain [l]etter [a]greement dated January 9, 2009," i.e., the 2009 agreement. On June 30, 2016, Beretta and DeQuattro signed another "written consent of the stockholders," agreeing to the transfer of Beretta's shares of common stock of the corporation to DeQuattro. This document, like its April 1, 2016 counterpart, explicitly provided that the signatories consented to the transfer "notwithstanding the terms and conditions of [the 2009 agreement]." The terms of the sales were set forth in an agreement dated July 14, 2016 (2016 agreement) providing, inter alia, that (1) DeQuattro would become the corporation's majority shareholder and Beretta would relinquish any ownership interest in the corporation by May 1, 2018, and (2) that "this [a]greement contains the entire agreement between the [m]embers." Under the terms of the 2016 agreement, Beretta sold all his shares in the corporation, although he remained president of the corporation until his retirement on December 31, 2019.
Discussion. 1. Standard of proof. We review de novo the allowance of a motion to dismiss under Mass. R. Civ. P. 12 (b) (6). See Curtis v. Herb Chambers I-95, Inc., 458 Mass. 674, 676 (2011). In doing so, we accept "the facts asserted in the complaint as true and draw[ ] all reasonable inferences in the plaintiff's favor" to determine " ‘whether the factual allegations in the complaint are sufficient, as a matter of law, to state a recognized cause of action or claim, and whether such allegations plausibly suggest an entitlement to relief.’ " Dunn v. Genzyme Corp., 486 Mass. 713, 717 (2021), quoting Dartmouth v. Greater New Bedford Regional Vocational Tech. High Sch. Dist., 461 Mass. 366, 374 (2012). "[A] plaintiff's obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and conclusions." Iannacchino, 451 Mass. at 636, quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).
2. Conspiracy. To prove a claim of civil conspiracy as alleged in this case, the plaintiff "must show an underlying tortious act in which two or more persons acted in concert and in furtherance of a common design or agreement." Bartle v. Berry, 80 Mass. App. Ct. 372, 383-384 (2011). Compare Kurker v. Hill, 44 Mass. App. Ct. 184, 188 (1998) (discussing alternate theory of conspiracy grounded in an allegation that defendants had some coercive power over plaintiff). Here, the corporation's conspiracy claim against APS and Dowling was based on the theory that Beretta defrauded the corporation by selling his shares in the corporation to DeQuattro in a way that was inconsistent with the provisions of the 2009 agreement, and that Dowling and APS counseled Beretta in a manner that allowed him to do so. For reasons in line with those articulated by the motion judge in her well-reasoned decision, we conclude that this claim was properly dismissed.
The plaintiffs did not rely on that theory here.
We discern nothing improper in the members of the executive committee agreeing to vary the terms of the 2009 agreement to allow Beretta to sell his shares to DeQuattro after the 2012 deadline for their purchase by "new investors" had passed, or alternatively, to waive the requirements of the 2009 agreement and to enter into a new agreement that allowed for the transfer of Beretta's shares to DeQuattro in June 2016. See Findlen v. Winchendon Hous. Auth., 28 Mass. App. Ct. 977, 978 (1990) (parties may, of course, alter written contracts). Indeed, the plaintiffs did not argue that such a variation was impermissible; rather, their theory was that Beretta "circumvent[ed]" the 2009 agreement by failing to inform the corporation about its requirements, thus duping the executive committee into a new agreement that offered greater benefits to Beretta than he was entitled to under the 2009 agreement. We find this argument unpersuasive.
All members of the corporation's executive committee, including DeQuattro, were signatories to the 2009 agreement, and thus were all presumed to have knowledge of its substance. See Hull v. Attleboro Sav. Bank, 33 Mass. App. Ct. 18, 24 (1992) (signatory to legal document "presumed to know its contents"). The knowledge of the executive committee, as the controlling body of the corporation, was, in turn, imputed to the corporation. See Demoulas v. Demoulas, 428 Mass. 555, 584-585 (1998). The complaint did not "plausibly suggest" fraud in Beretta's failure to disclose to the corporation information which it was already presumed to know.
At oral argument, DeQuattro argued that the presumption is rebuttable and that, at the motion to dismiss stage, the judge should not have applied it. DeQuattro's brief did not raise this argument, and thus we need not consider it. See Mass. R. A. P. 16 (a) (9) (A), as appearing in 481 Mass. 1629 (2019).
Even if the corporation and DeQuattro had been unaware of the substance of the 2009 agreement as late as their March 31, 2016 approval of the sale, DeQuattro and the other members of the executive committee were explicitly reminded of that agreement the following day. The one-page written consent for the transfers of Hatcher's shares to DeQuattro specifically provided that DeQuattro was agreeing to the sale of the shares "notwithstanding the terms and conditions of [the 2009 agreement]." See Hull, 33 Mass. App. Ct. at 24. See also Demoulas, 428 Mass. at 577, quoting West's Case, 313 Mass. 146, 151 (1943) ("If a person confronted with a state of facts closes his eyes in order that he may not see that which would be visible and therefore known to him if he looked, he is chargeable with ‘knowledge’ of what he would have seen had he looked").
The executive committee members signed the written consent for the sale of Hatcher's shares on April 1, 2016, more than a month before Beretta was obligated to sell the remainder of his stock to the corporation under the terms of the 2009 agreement.
Where the allegations of the complaint failed to make out a viable claim that Beretta committed fraud, the plaintiff failed to state a claim against Dowling and APS for conspiracy based on their participation in, or encouragement of, his fraudulent conduct. See Bartle, 80 Mass. App. Ct. at 383-384.
To the extent that the plaintiff's conspiracy claims against Dowling and APS relied on allegations that Beretta hid or destroyed corporate records, they do not allege that either Dowling or APS was aware of those actions. Cf. Kurker, 44 Mass. App. Ct. at 189 (knowledge of tortious conduct required to impose liability for civil conspiracy).
2. Legal malpractice. The plaintiffs alleged that Dowling and APS committed malpractice when Dowling gave legal advice to Beretta to the detriment of the corporation, which was her client. "To prevail on a claim of negligence by an attorney, a client must demonstrate that the attorney failed to exercise reasonable care and skill in handling the matter for which the attorney was retained ...; that the client has incurred a loss; and that the attorney's negligence is the proximate cause of the loss." Greenspun v. Boghossian, 95 Mass. App. Ct. 335, 339 (2019), quoting Global NAPs, Inc. v. Awiszus, 457 Mass. 489, 500 (2010). Putting aside any conclusory language and limiting our review to the facts and reasonable inferences drawn from the complaint, we conclude that the plaintiffs failed to make out a claim against Dowling and APS for malpractice.
As we have discussed, we discern no actual conflict between Beretta and the corporation where the complaint failed adequately to allege that Beretta defrauded the corporation by improperly "maneuvering around" the 2009 agreement. Even if that were not the case, however, the complaint also fails to allege that Dowling and APS were aware of any intent on Beretta's part to breach the 2009 agreement. Cf. Bryan Corp. v. Bryan Abrano, 474 Mass. 504, 513-514 (2016) (law firm prohibited from representing closely-held corporation where prospect of representing individual members against corporation reasonably foreseeable). Compare Baker v. Wilmer Cutler Pickering Hale & Dorr LLP, 91 Mass. App. Ct. 835, 848–849 (2017) (allegation that attorneys for closely held corporation acted covertly and with knowledge that majority members were breaching their fiduciary duty to minority members and substantially assisted in breach sufficient to sustain conspiracy claim). The March 16, 2015 e-mail exchange ended with Dowling's informing Beretta that in signing the 2009 agreement, Beretta had already contracted away his right to retain control of the corporation; there is no factual support in the complaint for the contention that Beretta intended to breach that agreement or that Dowling counseled him about doing so. None of the other communications identified in the complaint show the existence of any actual or potential conflict between Beretta and the corporation that would have required Dowling to disclose the communications. The plaintiffs’ allegation that Beretta's March 30, 2015 e-mail exchange with Dowling was an attempt to use a corporate dividend to acquire additional shares in the corporation, and through them, control over it, are negated by the substance of Dowling's response, which cannot be read to refer to shares in the corporation. As to any other communications between Beretta and Dowling, the plaintiffs allege nothing of their substance. Accordingly, the complaint failed to allege a conflict of interest that Dowling was required to report to the corporation.
The complaint alleges that on that date (and continuing on June 12, 2015), Beretta contacted Dowling to ask whether he was entitled to a dividend, and that he did so "intend[ing] to increase his ownership position in [the corporation] prior to selling his [s]hares, and to buy preferred stock, ... in order to maintain control of [the corporation]." Although DeQuattro's side of the communication is not part of the record, Dowling's e-mailed response was attached to the complaint. It is apparent from Dowling's response, in which she requested that Beretta provide her with the "name of the company" issuing the shares and the "number of shares standing in the name of [the corporation]" that the exchange was not about Beretta's right to additional shares in the corporation.
Finally, for the reasons we have already discussed, we conclude that Dowling and APS were under no obligation to remind the plaintiffs of the terms of the 2009 agreement at any time after it was signed. Even assuming that they were under such an obligation, however, it was satisfied by the explicit reference to the 2009 agreement in the written consent forms the executive committee members signed before transferring Hatcher's and Beretta's shares to DeQuattro in 2016.
Given our analysis, and the conclusion that we reach, we need not and do not reach the question whether the complaint adequately alleged damages. Nor do we determine whether the complaint stated a claim against Beretta, as opposed to Dowling and APS.
Judgment of dismissal affirmed.