Opinion
No. 12–P–421.
2012-11-28
Carlos Albert THOMPSON v. Aroldis CHAPMAN.
By the Court (KAFKER, COHEN & TRAINOR, JJ.).
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
The plaintiff, Carlos Albert Thompson, appeals from the grant of a motion for judgment on the pleadings by the defendant, Aroldis Chapman, on the plaintiff's action for breach of contract. Chapman prevailed below on the basis that the contract was null and void because of Federal regulations prohibiting transactions with Cuban nationals. We hold that the motion judge dismissed the case prematurely, and therefore reverse.
Background. As a motion for judgment on the pleadings is governed by the same standard as a motion to dismiss under Mass.R.Civ.P. 12(b)(6), 365 Mass. 754 (1974), see Welch v. Sudbury Youth Soccer Assn., Inc., 453 Mass. 352, 353–354 (2009), we review de novo whether the complaint is sufficient to “raise a right to relief above the speculative level ... [based] on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” Iannacchino v. Ford Motor Co., 451 Mass. 623, 636 (2008), quoting from Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2008). The complaint alleges that the plaintiff is a citizen of Massachusetts, and the defendant “is a Cuban national” who has defected from Cuba. In July, 2009, the parties executed an agreement in Spain providing that the plaintiff would perform personal services or act as an agent for the defendant, and in exchange the defendant would pay the plaintiff a percentage of the income from any professional baseball contract or marketing agreement he entered into for a specified time period. In January, 2010, the defendant signed a multi-million dollar contract to play for the Cincinnati Reds, but has refused to pay any compensation to the plaintiff. Discussion. Under the Cuban Assets Control Regulations (CACR), which date back to the Kennedy administration, persons subject to United States jurisdiction are generally prohibited from conducting transactions with Cuba or Cuban nationals without a license from the Office of Foreign Assets Control of the Treasury Department (OFAC). See Dean Witter Reynolds, Inc. v. Fernandez, 741 F.2d 355, 356–357 (11th Cir.1984). Specifically, all “transfers” of “property” in which any Cuban national has “any interest of any nature whatsoever” by “any person subject to the jurisdiction of the United States” is “null and void” as a matter of Federal law. 31 C.F.R. §§ 515.201(b), 515.203(a) (2010). As the definition of “transfer” includes “the making, execution, or delivery of any ... agreement [or] contract,” 31 C.F.R. § 515.310 (2010), and “property” is defined to include “services,” 31 C.F.R. § 515.311(a) (2010), the services contract at issue here is a “transfer” of “property” from an American to a Cuban national and therefore falls within the CACR. However, OFAC may issue a license validating a particular transfer, and may do so after the fact if it explicitly makes the license retroactive. See 31 C.F.R. §§ 515.203(c), 515.502(a), 515.802 (2010). In particular, a Cuban national may be “unblocked,” or given a general license exempting him from most requirements of the CACR, if he takes up residence in the United States or a third country. See generally 31 C.F.R. §§ 515.307, 515.505 (2010). Even if a Cuban national has not been unblocked, “[a]ny person having an interest in a transaction” otherwise prohibited may apply for a specific license authorizing it. 31 C.F.R. § 501.801(b)(2) (2010). See 31 C.F.R. § 515.501 (2010).
The parties agree that the regulations appended to the plaintiff's appellate brief are the regulations that apply to this dispute.
If the defendant was unblocked before the contract was signed, or if either party obtained an OFAC license covering it, the CACR would not void the contract. The complaint makes no allegation regarding whether either party has obtained an OFAC license covering the contract, nor when the defendant was unblocked by OFAC. Nonetheless, it is a reasonable inference from the complaint that the defendant either was unblocked or otherwise received a license in order to sign his baseball contract, or else that contract would be void. See Greenleaf Arms Realty Trust I, LLC v. New Boston Fund, Inc., 81 Mass.App.Ct. 282, 288 (2012) (reviewing court must draw all reasonable inferences in plaintiff's favor). The question is therefore whether the plaintiff was obligated to plead more specifically the existence of a license validating the contract.
We hold that the complaint was sufficient to plausibly suggest an entitlement to relief. Iannacchino v. Ford Motor Co., supra at 636. The illegality of a contract is an affirmative defense on which the defendant bears the burden of proof. See Hastings Assocs. v. Local 369 Bldg. Fund, Inc., 42 Mass.App.Ct. 162, 173 (1997), citing Town Planning & Engr. Assocs. v. Amesbury Specialty Co., 369 Mass. 737, 744 (1976). It should therefore not be decided at the pleading stage unless the illegality is “evident from the allegations of the complaint alone.” Fleming v. National Union Fire Ins. Co., 445 Mass. 381, 389 (2005), quoting from Gutierrez v. Massachusetts Bay Transp. Authy., 437 Mass. 396, 404 (2002). Compare Fogg v. Fogg, 409 Mass. 531, 532 n. 1 (1991) (error to decide affirmative defense of deception in contract formation on motion to dismiss) with Capazzoli v. Holzwasser, 397 Mass. 158, 160–161 (1986) (affirming dismissal where essential provision of contract rendered it unenforceable as matter of law). The plaintiff has not had an opportunity for discovery to determine the timing and scope of any OFAC licenses obtained by the defendant, which could plausibly validate the contract. And even if no such license is currently in place, the action may survive if the plaintiff obtains a retroactive license during litigation. See Lary v. Republic of Cuba, 643 F.Supp. 194, 197 (S.D.N.Y.1986), aff'd, 814 F.2d 653 (2d Cir.1987). Cf. Dean Witter Reynolds v.. Fernandez, 741 F.2d at 361–363 & n. 28. It was therefore erroneous to grant judgment on the pleadings.
Unlike in Lary, the complaint at issue here suggests that the defendant has been unblocked, and so it is more than merely speculative that a license could have been or would be granted by OFAC. Compare Lary, supra at 196 (noting plaintiff's admitted failure to seek a license and his certain understanding that the transaction was blocked when he entered into it). Additionally, the defendant in Lary was the Cuban government itself, not a Cuban defector who, it can be inferred from the complaint, is now unblocked.
Judgment on motion for judgment on the pleadings reversed.