Opinion
1884CV00648BLS1
12-28-2018
VERTICAL BIOMETRICS, LLC et al. v. PLEX RESEARCH, INC. et al.
File Date: January 3, 2019
DECISION AND ORDER REGARDING DEFENDANTS’ MOTIONS TO DISMISS (DOCKET ENTRY NOS. 16.0-20.0)
Brian A. Davis, Associate Justice of the Superior Court
Plaintiff Alex Sukharevsky ("Dr. Sukharevsky"), a founder and former Chief Technology Officer ("CTO") of defendant Plex Research, Inc. ("Plex" or the "Company"), filed this action in February 2018 claiming, among other things, that he was fraudulently induced into assigning certain intellectual property rights to Plex, and that he was wrongfully terminated by Plex from his position as CTO. Dr. Sukharevsky makes claims on behalf of himself and two of his companies, plaintiffs Vertical Biometric, LLC ("Vertical") and Lhasa, LLC ("Lhasa" or, collectively, "Plaintiffs"), not only against Plex, but also against defendants Douglas Selinger ("Mr. Selinger"), Marc F. Dupré ("Mr. Dupré "), Gunderson, Dettmer, Stough, Villenueve, Franklin & Hachigan, LLP ("Gunderson Dettmer"), Andrew Volpe ("Mr. Volpe"), First Star Ventures, LLC ("First Star"), First Star Ventures Fund II, LP ("First Star II"), Rajeev Surati ("Mr. Surati"), and Timothy Wall ("Mr. Wall" or, collectively, "Defendants"), all of whom are either officers, financiers, or employees of, or legal counsel to, Plex. The following additional background facts are alleged in Plaintiffs’ Complaint:
Confusingly, the Complaint identifies two separate "Plex" entities: Plex Research, Inc. and Plex Research, Inc. (DE). Dr. Sukharevsky, however, conceded at the court hearing on August 21, 2018, that Plex is, in fact, a single company that is incorporated in the State of Delaware. Accordingly, the Court refers to Plex Research, Inc. and Plex Research, Inc. (DE) throughout this Decision and Order simply as "Plex."
In 2004, Dr. Sukharevsky founded Lhasa, a software company that serves as a "consulting partner and provider of discovery software solutions for academic, government and industrial clients." Complaint (Docket Entry No. 1.0), ¶ 17. Eleven years later, Dr. Sukharevsky founded a second company, Vertical, that develops "data-driven biometric solutions for medical applications." Id. As a result of his work at both companies, Dr. Sukharevsky purportedly "developed extensive know-how in scientific data search engines, and, in particular, a significant volume of proprietary code for drug discovery applications, as well as for network analysis and data integration." Id.
Mr. Selinger, then an employee at Novartis Pharmaceuticals ("Novartis"), met Dr. Sukharevsky in 2013 while Dr. Sukharevsky was performing contract work at Novartis. The two struck up a friendship and they continued to stay in touch after Dr. Sukharevsky’s work for Novartis ended.
In late 2016, Mr. Selinger contacted Dr. Sukharevsky and asked him to help Mr. Selinger with his efforts to develop a new business based on a Novartis-owned scientific search engine known as "MOA Central." Dr. Sukharevsky accepted the offer and, as a result, turned down other business opportunities. Mr. Selinger and Dr. Sukharevsky’s business venture involving MOA Central was short-lived. They remained undeterred, however, and later decided to form another venture that would "develop[ ] from scratch" and commercialize a scientific search engine technology similar to MOA Central. Id., ¶ 24. As part of this new effort, Dr. Sukharevsky agreed to utilize the software, know-how, and intellectual property that he had developed at Lhasa and Vertical, as well as his professional network connections. In particular, Dr. Sukharevsky agreed to contribute the know-how and source code he had acquired in developing two scientific search engines known as "LHASA" and "SciGlass." Id., ¶ 43.
In deciding how to structure their new venture, Mr. Selinger and Dr. Sukharevsky orally agreed that the Company, which they named "Plex," would be authorized to issue a total of 5 million shares of common stock. They also agreed that all important operational decisions would be made jointly. Both founders were to take full-time positions at Plex and to dedicate their work to the new Company. For Dr. Sukharevsky, this meant suspending the operations of Vertical and Lhasa. For Mr. Selinger, it meant leaving his position at Novartis. It was further agreed that both Mr. Selinger and Dr. Sukharevsky would receive a "standard C-level compensation package" at Plex, which included base salaries of $ 200, 000 per year, a six percent (6%) one-to-one match on 401K plan contributions, and other benefits typical in the industry. Id., ¶ 37. These benefits, however, were contingent on securing funding for the new Company from investors.
On March 3, 2017, Mr. Dupré, an attorney with Gunderson Dettmer and Plex’s legal counsel, incorporated Plex in Delaware. Three days later, Plex was registered to do business in Massachusetts. Dr. Sukharevsky learned at or around this time (allegedly to his surprise) that Plex’s Articles of Incorporation authorized the Company to issue 10 million shares of common stock, rather than the 5 million shares he and Mr. Selinger previously had agreed upon.
Dr. Sukharevsky incorrectly identifies Gunderson Dettmer in his Complaint as a "venture capital firm," rather than a law firm. Id., ¶ 8.
With Plex’s incorporation, Mr. Selinger became the Company’s Chief Executive Officer ("CEO"), Dr. Sukharevsky became CTO, and Mr. Duprébecame Plex’s Secretary. Both Mr. Selinger and Dr. Sukharevsky also became Directors of the Company. At or around the same time, Dr. Sukharevsky formalized his intellectual property contribution to the Company by executing a "Technology Assignment Agreement" (the "Assignment Agreement"), a "Stock Purchase Agreement" (the "SPA"), and a "Proprietary Information and Inventions Agreement" (the "Inventions Agreement"). In the Assignment Agreement, which is dated as of March 3, 2017, Dr. Sukharevsky assigned all of his intellectual property rights "applicable to [the] development and commercialization of a scientific search engine" to Plex in return for 2, 125, 000 shares of common stock in the Company. Id., Exhibit 3.
At the time Dr. Sukharevsky filed his Complaint, he continued to serve, at least officially, as Plex’s Treasurer. See id., ¶ 3.
The SPA and the Inventions Agreement are referenced in the Assignment Agreement, which is attached to the Complaint as Exhibit 3.
On or about April 1, 2017, Mr. Volpe invested in Plex through his companies, First Star and First Star II, as part of an initial $ 1.5 million seed round of financing. Mr. Volpe thereafter began acting like a third member of Plex’s Board of Directors, although he never officially held the position of Director.
Plex’s planned search engine was "fundamentally different" from MOA Central and required significant additional development work, which was led by Dr. Sukharevsky. Id., ¶¶ 40-45. While Plex’s technology development effort was underway, Mr. Selinger conducted weekly "investor" meetings. Initially, the meetings were attended by Dr. Sukharevsky, Mr. Selinger, and Mr. Volpe, as well as Mr. Surati, another investor in Plex, and Vadim Alexandrov ("Mr. Alexandrov"), Plex’s Chief Scientific Officer. Mr. Selinger, however, eventually asked Dr. Sukharevsky and Mr. Alexandrov to stop participating so they could focus on their development work. Mr. Selinger agreed to give Dr. Sukharevsky updates as to what occurred at the investor meetings. It is during the investor meetings Dr. Sukharevsky did not attend that Mr. Selinger, Mr. Surati, and Mr. Volpe allegedly "developed a conspiracy to remove [Dr.] Sukharevsky from any control at Plex." Id., ¶ 50.
At some point after Dr. Sukharevsky stopped attending the investor meetings, Plex, relying upon the advice of Mr. Volpe and Mr. Surati, hired Mr. Wall, who was Mr. Surati’s former MIT roommate, as the Company’s lead system architect. Although Dr. Sukharevsky was Mr. Wall’s immediate supervisor, Mr. Wall purportedly exhibited adversarial and insubordinate behavior towards Dr. Sukharevsky soon after he was hired. Mr. Wall ignored Dr. Sukharevsky’s direct assignments and did not follow Dr. Sukharevsky’s outlined plans, which derailed the development process and led to project delays. According to Dr. Sukharevsky, "[Mr.] Wall’s conduct and actions were consistent with a conscious sabotage." Id., ¶ 54.
Dr. Sukharevsky took a vacation from Plex during the period from December 15, 2017 to January 3, 2018. When he returned, he learned that Plex had decided at one of the investor meetings to engage in another round of seed financing without his consent. Dr. Sukharevsky "disagreed" with the decision to obtain more seed financing based, at least in part, on his fear that it would further dilute his stake in the Company. Id., ¶ 62. Dr. Sukharevsky also made multiple requests to Mr. Selinger at or around the same time to have the Company finally set up a corporate 401K plan and to fire Mr. Wall. These requests were repeatedly ignored by Mr. Selinger.
Finally, on February 6, 2018, Mr. Selinger agreed to fire Mr. Wall and arrangements were made with Mr. Dupréto terminate Mr. Wall’s employment effective February 9, 2018. Mr. Selinger notified Dr. Sukharevsky on that date, however, that he had changed his mind and that Mr. Wall would remain employed by Plex. Then, three days later (i.e., on February 12, 2018), Mr. Selinger terminated Dr. Sukharevsky as CTO. Mr. Selinger initially told Dr. Sukharevsky that his termination was due to Dr. Sukharevsky’s inability to "create a team," but he later acknowledged that he "simply did not want to hear [Dr.] Sukharevsky’s objections to [his] decisions." Id., ¶ 72.
Dr. Sukharevsky called Mr. Dupréthe following day "to seek legal advice" and to find out if Mr. Selinger had consulted with Mr. Duprébefore terminating him. Id., ¶ 73. According to Dr. Sukharevsky, Mr. Dupréfalsely denied that Mr. Selinger had discussed Dr. Sukharevsky’s firing with him. Dr. Sukharevsky later learned from Mr. Selinger that he had spoken with Mr. Dupréabout Dr. Sukharevsky’s termination in order to confirm that he could fire Dr. Sukharevsky without the approval of Plex’s Board of Directors. Dr. Sukharevsky alleges that Mr. Dupré ’s "self-serving" statements constitute proof that Mr. Dupréwas "involved in what appeared to be a conspiracy to remove [Dr.] Sukharevsky from Plex." Id., ¶ 74.
Plex’s Board of Directors held an emergency meeting, at Dr. Sukharevsky’s request, on February 15, 2018, at Mr. Volpe’s office in Boston to discuss Dr. Sukharevsky’s termination. Dr. Sukharevsky offered at the meeting to transition from CTO into a role as an "individual contributor writing software code," but his proposal was rejected by the Board. Id., ¶¶ 75-77. The next day, Dr. Sukharevsky received a written separation agreement drafted by Mr. Dupré, which was followed by a formal termination letter. Dr. Sukharevsky left the Company on or about February 21, 2018.
Dr. Sukharevsky commenced this Superior Court action less than one week later on February 26, 2018. His Complaint contains eleven counts on his own behalf and on behalf of Vertical and Lhasa. They are:
Count I against all Defendants, except Mr. Wall and Mr. Surati, seeking the "judicial dissolution" of Plex;
Count II against Plex, Mr. Selinger, and Mr. Dupréseeking "restitution, annulment" of the Assignment Agreement;
Count III against all Defendants, except Mr. Wall and Mr. Surati, seeking a judicial declaration that Dr. Sukharevsky remains the "legal holder" of the intellectual property referenced in the Assignment Agreement;
Count IV against Mr. Selinger, Mr. Dupré, Mr. Volpe, First Star, and First Star II alleging that Dr. Sukharevsky was fraudulently induced to enter into the Assignment Agreement;
Count V against Mr. Selinger, Mr. Dupré, and Mr. Volpe alleging misrepresentation "regarding their goals" as to Plex;
Count VI against Mr. Selinger, Mr. Dupré, and Mr. Volpe alleging their participation in a "fraudulent scheme with regard to [Dr.] Sukharevsky";
Count VII against Mr. Selinger, Mr. Dupré, and Gunderson Dettmer alleging breach of their fiduciary duties to Dr. Sukharevsky;
Count VIII against all Defendants except Mr. Wall seeking a recovery in quantum meruit;
Count IX against all Defendants, except Mr. Wall and Mr. Surati, alleging violations of G.L.c. 93A;
Count X against all Defendants seeking to enjoin their continued "use or misuse" of the intellectual property referenced in the Assignment Agreement; and
Count XI against Plex, Mr. Selinger, and Mr. Dupréseeking compensation for their alleged "confiscation of benefits and entitlements" allegedly owed to Dr. Sukharevsky.
Although Count II of the Complaint speaks in terms of "restitution," it is apparent from the parties’ court filings that the actual claim Dr. Sukharevsky seeks to assert by way of Count II is a claim for "rescission" of the Assignment Agreement.
The case came before the Court most recently on Defendants’ motions to dismiss the Complaint pursuant to Mass.R.Civ.P. 12(b)(6), 12(b)(1), and 12(b)(3). Dr. Sukharevsky opposes the motions. The Court conducted a lengthy hearing on Defendants’ motions to dismiss on August 21, 2018. At the hearing, both sides expressed an interest in potentially rescinding the Assignment Agreement, which would obviate most, if not all, of their dispute. Accordingly, the Court agreed to delay any ruling on Defendants’ motions to dismiss until September 28, 2018, in order to give the parties an opportunity to negotiate. That deadline later was extended, at the parties’ request, until October 31, 2018. On November 1, 2018, the parties informed the Court that they had been unsuccessful in reaching an agreement and they requested that the Court proceed to resolve Defendants’ motions to dismiss. Hence, this decision and order.
Defendants seek dismissal under Rules 12(b)(1) and 12(b)(3) only with respect to Count I (judicial dissolution).
In his omnibus opposition, dated April 13, 2018, Dr. Sukharevsky sought an evidentiary hearing and conversion of Defendants’ motions into motions for summary judgment. The Court rejected the request, but did give Dr. Sukharevsky leave to file a supplemental memorandum addressing each of the motions in greater detail.
In order to survive a motion to dismiss under Rule 12(b)(6), a claim must include "[f]actual allegations [sufficient] ... to raise a right to relief above the speculative level ... [based] on the assumption that all the allegations in the [pleading] are true (even if doubtful in fact) ..." Iannacchino v. Ford Motor Co., 451 Mass. 623, 636 (2008) (internal quotation marks and citation omitted). The Court also is required to take as true "such inferences as may be drawn [from the allegations of the claim or counterclaim] in the [claimant’s] favor ..." Nader v. Citron, 372 Mass. 96, 98 (1977).
Upon consideration of the written submissions of the parties and the oral arguments of counsel, the motions to dismiss filed by Mr. Wall, Mr. Surati, Gunderson Dettmer, First Star, and First Star II are ALLOWED in their entirety, and the motions to dismiss filed by Plex, Mr. Selinger, Mr. Dupré, and Mr. Volpe are ALLOWED IN PART and DENIED IN PART for the reasons discussed below.
1. Claims Asserted by Vertical and Lhasa
Defendants seek the dismissal of all claims asserted against them by Vertical and Lhasa on the ground that these entities lack standing to bring such claims. The Court agrees that Vertical and Lhasa lack standing to bring any claims against Defendants based on the facts pled in the Complaint. "To have standing in any capacity, a litigant must show that the challenged action has caused the litigant injury." Slama v. Attorney Gen., 384 Mass. 620, 624 (1981). Moreover, the injury must be a direct and ascertainable result of the defendant’s alleged actions; "[i]njuries that are speculative, remote, and indirect are insufficient to confer standing." Sullivan v. Chief Justice for Admin. & Mgt. of the Trial Court, 448 Mass. 15, 21 (2006).
In this case, the allegations of Plaintiffs’ Complaint make it clear that Vertical and Lhasa are not parties to any of the agreements at issue, and neither entity holds a possessory interest in any of the intellectual property that Defendants purportedly took from Dr. Sukharevsky by fraud or other unlawful means. Indeed, the Complaint expressly states that the only reason Vertical and Lhasa are parties to this action is "because [they have] an interest in its outcome and [are] designated to become the user[s] of the intellectual property and know-how that have been improperly assigned to [Plex]." Complaint, ¶¶ 1-2. Accepting these allegations as true, as the Court must (see Nader, supra), any injuries that Vertical and Lhasa may suffer in the future on account of Defendants’ conduct are, at best, "speculative, remote, and indirect" and, therefore, "insufficient to confer standing" on Vertical and Lhasa in this proceeding. Sullivan, 448 Mass. at 21. Accordingly, Defendants’ motions to dismiss are ALLOWED as to all claims asserted against them by Vertical and Lhasa.
As best the Court can tell from Plaintiffs’ Complaint, Vertical and Lhasa are claimants, with Dr. Sukharevsky, on all counts of the Complaint, with the exception of Count XI ("confiscation of benefits and entitlements").
2. Claims Asserted by Dr. Sukharevsky
Count I (Judicial Dissolution)
Count I, which is asserted against Plex, Mr. Selinger, Mr. Dupré, First Star, First Star II, and Gunderson Dettmer, alleges that Plex’s incorporation was the "result of a calculated fraud on [Dr.] Sukharevsky" and "nothing more than a vehicle to obtain from [Dr.] Sukharevsky an assignment of [his] intellectual property and know-how ..." Complaint, ¶ 83. The relief requested in Count I is a court order dissolving Plex "[p]ursuant to [G.L.] Chapter 156D, Section 14.30." Id., ¶ 82. Plex, however, is a Delaware corporation. Because dissolution necessarily implicates Plex’s internal affairs, Massachusetts corporate law is inapplicable. See Harrison v. Netcentric Corp., 433 Mass. 465, 471 (2001) ("[T]he State of incorporation dictates the choice of law regarding the internal affairs of a corporation"). Accordingly, Defendants’ motions to dismiss Count I of Plaintiffs’ Complaint, as currently pled, are ALLOWED. The Court, however, grants Dr. Sukharevsky leave to replead this claim under Delaware law, if he wishes to do so.
Defendants contend that a Massachusetts state court lacks the power to dissolve a Delaware corporation, and that only the Delaware Chancery Court may do so. Defendants have not cited any explicit authority for this proposition, however. Conversely, this Court has identified at least one reported case in which a Delaware Chancellor has intimated that a foreign court may dissolve a Delaware corporation under Delaware law. See McElroy v. Schornstein, 2012 WL 2428343, at *2 n.16 (Del.Ch. June 20, 2012) (Strine, J.) ("I make no comment on whether McElroy may press a § 273 dissolution claim in the New Jersey Action. This dismissal ... does not bar him from attempting to do so immediately"). The Court’s ruling today effectively defers the final resolution of this question to a later time.
Count II (Rescission of the Assignment Agreement)
Count II, which is asserted against Plex, Mr. Selinger, and Mr. Dupré, alleges that "[Mr.] Selinger and others, by way of making deceptive and misleading representations, induced [Dr.] Sukharevsky to execute" the Assignment Agreement, and that "Plaintiffs are entitled to relief of [rescission]" with regard to that Agreement. Complaint, ¶¶ 87-88. Neither Mr. Selinger, nor Mr. Dupréare parties to the Assignment Agreement in their personal capacities, however. Indeed, Mr. Duprénever signed the document in any capacity. Accordingly, Count II fails to state a claim against Mr. Selinger and Mr. Dupréand their motions to dismiss Count II of Plaintiffs’ Complaint are ALLOWED.
Plex, on the other hand, is a party to the Assignment Agreement and, therefore, a proper target of Dr. Sukharevsky rescission claim. Taking all of the allegations of the Complaint as true, and drawing all reasonable inferences in Dr. Sukharevsky’s favor (see Nader, supra), the Court cannot conclude at this early stage that Dr. Sukharevsky never will be able to demonstrate that rescission of the Assignment Agreement is warranted. Accordingly, Plex’s motion to dismiss Count II of Plaintiffs’ Complaint is DENIED.
Count III (Declaratory Judgment)
Count III, which is asserted against all Defendants except Mr. Wall and Mr. Surati, seeks, "[a]s part of relief of [rescission]," the issuance of a judicial declaration that Dr. Sukharevsky remains the "legal holder" of the intellectual property referenced in the Assignment Agreement. Id., ¶ 90. Because this claim tracks and mirrors Count II, the outcome is the same with regard to Defendants’ motions to dismiss. Mr. Selinger, Mr. Dupré, Gunderson Dettmer, First Star and, First Star II are not parties to the Assignment Agreement and, accordingly, their motions to dismiss Count III of Plaintiffs’ Complaint are ALLOWED. Plex’s motion to dismiss Count III, however, is DENIED for the reasons described above.
Count IV (Fraudulent Inducement)
Count IV, which is asserted against Mr. Selinger, Mr. Dupré, Mr. Volpe, First Star, and First Star II, alleges that, "[b]y their acts in January and February of 2017, [Mr.] Selinger, [Mr.] Volpe and [Mr.] Dupré, induced [Dr.] Sukharevsky to enter business with themselves," and that, "[f]rom the very start, [Mr.] Selinger, [Mr.] Volpe, and [Mr.] Dupréhad no intention to carry out their business obligations, but instead intended to obtain an assignment of [Dr. Sukharevsky’s] intellectual property and know-how." Id., ¶ 93.
At the hearing on Defendants’ motions to dismiss, Dr. Sukharevsky agreed to dismiss Count IV as against Mr. Volpe, First Star, and First Star II. Accordingly, their motions to dismiss Count IV are ALLOWED.
Count IV also must be dismissed as to Mr. Selinger and Mr. Duprébecause the allegations of Plaintiffs’ Complaint do not set out, with particularity, the purportedly fraudulent misrepresentations that underlie the claim. See Mass.R.Civ.P. 9(b) ("In all averments of fraud, mistake, duress or undue influence, the circumstances constituting fraud, mistake, duress or undue influence shall be stated with particularity"). See also Equipment & Systems For Industry, Inc. v. Northmeadows Constr. Co., 59 Mass.App.Ct. 931, 931-32 (2003) ("Equipment & Systems ") ("At a minimum, a plaintiff alleging fraud must particularize the identity of the person(s) making the representation, the contents of the misrepresentation, and where and when it took place. In addition, the plaintiff should specify the materiality of the misrepresentation, its reliance thereon, and resulting harm"). Accordingly, Mr. Selinger and Mr. Dupré ’s motions to dismiss Count IV of Plaintiffs’ Complaint are ALLOWED. The Court, however, grants Dr. Sukharevsky leave to replead his claim for fraudulent inducement in a manner consistent with Rule 9(b), if he wishes to do so.
Count V (Misrepresentation) and Count VI (Fraud)
Counts V and VI, which are asserted against Mr. Selinger, Mr. Dupré, and Mr. Volpe, allege that these Defendants "made misrepresentations to [Dr.] Sukharevsky ... regarding their goals" and "engaged in a fraudulent scheme with regard to [Dr.] Sukharevsky" for the purpose of "mak[ing] [Dr.] Sukharevsky part with his rights to [his] intellectual property and know-how," and that Dr. Sukharevsky "relied on those misrepresentations [and] acted on a good faith belief that these Defendants intended to make Plex a viable profitable company." Complaint, ¶¶ 97, 100. Count VI also makes reference to an "example" of Mr. Selinger, Mr. Dupré, and Mr. Volpe’s allegedly fraudulent conduct, that being "the number of common shares authorized for [Plex] after the seed round was 10, 000, 000 which meant that [Dr.] Sukharevsky’s share was significantly diluted, against the prior agreement to issue 5, 000, 000 shares, plus 1, 179, 775 shares agreed as the employee stock pool." Id., ¶ 101.
At the hearing on Defendants’ motions to dismiss, Dr. Sukharevsky agreed to dismiss Counts V and VI as against Mr. Volpe. Accordingly, his motion to dismiss Counts V and VI is ALLOWED.
As before, Counts V and VI also must be dismissed as to Mr. Selinger and Mr. Duprébecause the allegations of Plaintiffs’ Complaint do not set out, with particularity, the purported misrepresentations that underlie these claims. See Mass.R.Civ.P. 9(b). The recitation of a single "example" of Mr. Selinger and Mr. Dupré ’s alleged misrepresentations in one paragraph of in Plaintiffs’ Complaint is hardly sufficient to fulfill Rule 9(b)’s "particularity" requirement. See Charbonnier v. Amico, 367 Mass. 146, 151 (1975) (An "oblique remark" in plaintiffs’ complaint suggesting that trust was fraudulent "was not ample enough" to comply with requirement of Rule 9(b) that "[i]n all averments of fraud ... the circumstances ... shall be stated with particularity") (internal quotation marks omitted). Accordingly, Mr. Selinger and Mr. Dupré ’s motions to dismiss Counts V and VI of Plaintiffs’ Complaint are ALLOWED.
The Court, however, again grants Dr. Sukharevsky leave to replead these claims in a manner consistent with Rule 9(b), if he wishes to do so.
Should Dr. Sukharevsky decide to replead Counts IV, V, or VI, the allegations of his amended complaint should provide, "at a minimum," the "identity of the person(s) making the [mis]representation, the contents of the misrepresentation, and where and when it took place." Equipment & Systems, 59 Mass.App.Ct. at 931-32.
Count VII (Breach of Fiduciary Duties)
Count VII, which is asserted against Mr. Selinger, Mr. Dupré, and Mr. Dupré ’s law firm, Gunderson Dettmer, alleges that Mr. Dupré "had a conflict of interest" and that, "[a]s a result of that conflict of interest and [Mr.] Dupré ’s improper activities," Plex’s authorized capital "got inexplicably inflated" from 5, 000, 000 shares to 10, 000, 000 share, all of which allegedly was "part of an improper conspiracy to leave [Dr.] Sukharevsky without any means to effect the managerial decisions when it came to a confiscation of his rights." Complaint, ¶¶ 105-06. Dr. Sukharevsky further alleges that Mr. Dupré, along with Mr. Selinger, "engag[ed] in fraudulent conduct with regard to [Dr.] Sukharevsky" in order to "make [Dr.] Sukharevsky part with his rights to [his] intellectual property and know-how," and that Dr. Sukharevsky "acted on a good faith belief that these Defendants intended to make Plex a viable profitable company." Id., ¶ 107. Dr. Sukharevsky claims that these alleged transgressions by Mr. Selinger, Mr. Dupré, and Gunderson Dettmer violated the fiduciary obligations they purportedly owe or owed to him. Id., ¶ 108.
Under Delaware law, directors and officers of a company owe fiduciary duties both to the corporation and to its shareholders. Agostino v. Hicks, 845 A.2d 1110, 1122 n.53 (Del.Ch. 2004) ("The directors and officers of a corporation independently owe fiduciary duties directly to the stockholders") (internal quotation marks and citation omitted); Crescent/Mach I Partners, L.P. v. Turner, 846 A.2d 963, 979 (Del.Ch. 2000) ("Directors have an unyielding fiduciary duty to protect the interests of the corporation and the stockholders alike"); International Brotherhood of Electrical Workers Local No. 129 Benefit Fund v. Tucci, 476 Mass. 553, 563 (2017) ("Delaware ... has a history of asserting that directors stand in a fiduciary relation to stockholders of the company, in contrast to our own precedent"). Because Dr. Sukharevsky is a Plex shareholder, the allegations that Mr. Selinger and Mr. Dupréconspired to wrongfully strip him of his intellectual property and force him from the Company are sufficient to support a claim for breach of fiduciary duty to the extent that Mr. Selinger and Mr. Dupréare being sued in their capacities as officers and/or directors of Plex. Accordingly, Mr. Selinger’s and Mr. Dupré ’s motions to dismiss Count VII of Plaintiffs’ Complaint are DENIED.
The Court, however, will dismiss Count VII as to Gunderson Dettmer. The only fiduciary obligations that Gunderson Dettmer could owe Dr. Sukharevsky in the circumstances of this case would necessarily have to arise on account of Mr. Dupré ’s actions as a Gunderson Dettmer attorney. However, Dr. Sukharevsky has not pled allegations that plausibly suggest the existence of an attorney-client relationship between himself and Mr. Dupréor Gunderson Dettmer. Plaintiffs’ Complaint expressly states that Mr. Dupréhas served as "Plex’s corporate secretary and counsel." Complaint, ¶¶ 10, 105. Mr. Dupré ’s role as Plex’s legal counsel, by itself, did not also make him (or Gunderson Dettmer) Dr. Sukharevsky’s legal counsel. See Robertson v. Gaston Snow & Ely Bartlett, 404 Mass. 515, 524 (1989) ("An attorney for a corporation does not simply by virtue of that capacity become the attorney for ... its officers, directors or shareholders") (internal quotation and citation omitted). Dr. Sukharevsky’s conclusory allegation that he sought "legal advice" from Mr. Dupréafter he already had been terminated as Plex’s CTO is insufficient, by itself, to support the implication of an attorney-client relationship. See, e.g., DaRoza v. Arter, 416 Mass. 377, 381 (1993) ("An attorney-client relationship may be implied when (1) a person seeks advice or assistance from an attorney, (2) the advice or assistance sought pertains to matters within the attorney’s professional competence, and (3) the attorney expressly or impliedly agrees to give or actually gives the desired advice or assistance ... All three requirements must be met to establish the relationship") (internal quotation marks and citations omitted, emphasis added).
Absent an attorney-client relationship, the existence of a fiduciary relationship between Dr. Sukharevsky and Gunderson Dettmer in the present case would require proof that, during the relevant time frame, Dr. Sukharevsky "repose[d] faith, confidence, and trust" in Mr. Dupréfor Dr. Sukharevsky’s own, personal benefit, which is not alleged here. See Baker v. Wilmer Cutler Pickering Hale and Dorr, LLP, 91 Mass.App.Ct. 835, 842-47 (2017) (recognizing existence of fiduciary relationship between plaintiff shareholder of close corporation and corporation’s legal counsel, notwithstanding lack of attorney-client relationship, where plaintiff asserted that "he had reposed trust and confidence in the defendant attorney ..."). Accordingly, Gunderson Dettmer’s motion to dismiss Count VII of Plaintiffs’ Complaint is ALLOWED.
Count VIII (Quantum Meruit)
Count VIII, which is asserted against all Defendants except Mr. Wall, alleges that a "fair market rate" for persons with Dr. Sukharevsky’s educational and professional background is "approximately $ 315 per hour," and that Dr. Sukharevsky "should be compensated [in quantum meruit ] for the fair value of his work [for Plex], at the above rate, corresponding to the market for such experts." Complaint, ¶¶ 112, 115. In order for a claimant to recover in quantum meruit for work he or she performed, the claimant must prove "(1) that [he or she] conferred a measurable benefit upon the defendants; (2) that the claimant reasonably expected compensation from the defendants; and (3) that the defendants accepted the benefit with the knowledge, actual or chargeable, of the claimant’s reasonable expectation." Finard & Co., LLC v. Sitt Asset Mgmt., 79 Mass.App.Ct. 226, 229 (2011). Dr. Sukharevsky, however, has failed to plead any allegations plausibly suggesting that he reasonably expected to be compensated for the services he rendered to Plex from anyone other than Plex. Accordingly, the motions to dismiss Count VIII of Plaintiffs’ Complaint filed by Mr. Selinger, Mr. Dupré, Mr. Volpe, Mr. Surati, First Star, First Star II, and Gunderson Dettmer are ALLOWED.
Dr. Sukharevsky’s quantum meruit claim against Plex stands on a different footing. Plex contends that Dr. Sukharevsky cannot recover the fair value of his services in quantum meruit from Plex because Plaintiffs’ Complaint alleges elsewhere that Dr. Sukharevsky had an oral employment contract with the Company. See, e.g., Complaint, ¶ 37 ("In return for foregoing any other economic activities, and as a benefit of owning the stock, both [Dr.] Sukharevsky and [Mr.] Selinger were to take on full management positions with a standard C-level compensation package"). See also Boswell v. Zephyr Lines, Inc., 414 Mass. 241, 250 (1993) ("Recovery in quantum meruit presupposes that no valid contract covers the subject matter of a dispute. Where such a contract exists, the law need not create a quantum meruit right to receive compensation for services rendered"). Yet, notwithstanding the allegations of Plaintiffs’ Complaint, the parties continue to disagree as to whether Dr. Sukharevsky ever entered into an employment agreement with Plex. Because Dr. Sukharevsky’s employment status at Plex remains unclear, it would be premature for the Court to dismiss Dr. Sukharevsky’s quantum meruit claim against the Company at this juncture. Accordingly, Plex’s motion to dismiss Count VIII of Plaintiffs’ Complaint is DENIED.
Count IX (Violation of G.L.c. 93A)
Count IX, which is asserted against Mr. Selinger, Mr. Dupré, Mr. Volpe, First Star, and First Star II, and Gunderson Dettmer, alleges that these defendants committed unfair or deceptive acts or practices by stealing Dr. Sukharevsky’s intellectual property and forcing him from the Company. Although not specified in Plaintiffs’ Complaint, the Court treats this claim as one arising under Section 11 of G.L.c. 93A because the events complained of indisputably took place in the business-to-business context.
Massachusetts law holds that relief under G.L.c. 93A "is not available to parties in a strictly private transaction, where the undertaking is not in the ordinary course of a trade or business." Linkage Corp. v. Trustees of Boston University, 425 Mass. 1, 23 n.33 (1997) (internal quotation marks and citation omitted). Massachusetts appellate court decisions further have held that Section 11 does not apply to so-called "intra-enterprise" disputes; i.e., "disputes stemming from an employment relationship, disputes between individual members of a partnership arising from partnership business, and transactions and disputes between parties to a joint venture and between fellow shareholders" because "they are more similar to purely private disputes and are not commercial transaction[s] ... in the sense required by c. 93A." Id. (internal quotation marks and citation omitted). See also Weiler v. PortfolioScope, Inc., 469 Mass. 75, 93 (2014) ("Our cases make clear that G.L.c. 93A, § 11, does not cover internal employment or intra-enterprise disputes"). Thus, to the extent Count IX alleges misconduct by Mr. Selinger and Mr. Dupré, who are officers in the company, as well as First Star and First Star II, which are Plex shareholders (see Complaint, ¶ 30), the claim fails because it concerns a non-transactional, intra-enterprise or internal employment dispute. See Linkage Corp., 425 Mass. at 23 n.33. Accordingly, Mr. Selinger, Mr. Dupré, First Star and First Star II’s motions to dismiss Count IX of Plaintiffs’ Complaint are ALLOWED.
Count IX also fails as against Gunderson Dettmer because, as previously noted, Dr. Sukharevsky has not pled allegations that plausibly suggest the existence of an attorney-client relationship between himself and Mr. Dupréor Gunderson Dettmer, which is the only possible "commercial" relationship that Dr. Sukharevsky could have had with Gunderson Dettmer. See discussion re Count VII, supra. See also Tetrault v. Mahoney, Hawkes & Goldings, 425 Mass. 456, 462-63 (1997) ("[T]he proper party to assert a c. 93A claim against an attorney is a client or someone acting on a client’s behalf"); Miller v. Mooney, 431 Mass. 57, 64-65 (2000) (lawyer not liable to plaintiffs under G.L.c. 93A because plaintiffs "were neither his clients nor were they acting on behalf of a client"). Accordingly, Gunderson Dettmer’s motion to dismiss Count IX of Plaintiffs’ Complaint also is ALLOWED.
Dr. Sukharevsky’s Chapter 93A claim survives, however, against Mr. Volpe. The allegations of Plaintiffs’ Complaint indicate that Mr. Volpe was not a shareholder, officer, director, or employee of Plex during the relevant time period, but rather an outsider who allegedly participated in the other defendants’ purported efforts to remove Mr. Sukharevsky from the Company and take his intellectual property. While certainly a very close question, there is reported case law suggesting Chapter 93A liability may attach in circumstances such as those pled here. See Weiler, 469 Mass. at 94 n.39. (noting that "the factual circumstances of this case appear to be significantly different from the direct employer-employee or shareholder-corporation disputes to which we have held G.L.c. 93A inapplicable"). See also Beninati v. Borghi, 90 Mass.App.Ct. 556, 566-67 (2016) (while defendants and part owners of limited liability companies could not be held liable to co-owner plaintiffs under G.L.c. 93A, outsiders who had aided and abetted defendants in breaching their fiduciary and contractual obligations could be held liable to plaintiffs under statute). Accordingly, Mr. Volpe’s motion to dismiss Count IX of Plaintiffs’ Complaint is DENIED.
Indeed, Plaintiffs’ Complaint refers to Mr. Volpe as a "mastermind" of the alleged effort to remove Dr. Sukharevsky from the Company. Complaint, ¶ 11.
Count X (Injunctive Relief)
Count X, which is asserted against all Defendants, seeks a court order enjoining them from continuing to "use or misuse" the intellectual property and know-how that Dr. Sukharevsky claims was wrongfully taken from him. An injunction is a form of equitable relief that is available as a possible remedy for conduct that otherwise is unlawful, but it is not a stand-alone cause of action. Accordingly, Defendants’ motions to dismiss Count X of Plaintiffs’ Complaint are ALLOWED without prejudice to Dr. Sukharevsky’s right to seek and obtain injunctive relief, to the extent appropriate, as a remedy with respect to any other viable claim that Dr. Sukharevsky has asserted or may assert.
Count XI (Confiscation of Benefits and Entitlements)
Count XI, which is asserted against Mr. Selinger, Mr. Dupré, and Plex, seeks "damages due to nonpayment of benefits and entitlements due [Dr. Sukharevsky as] an employee of record at Plex." Complaint, ¶ 132. Massachusetts law does not recognize a cause of action for "[c]onfiscation of [b]enefits and [e]ntitlements" of an employee as Count XI is phrased in Plaintiffs’ Complaint, but it does recognize a claim for breach of contract based on an employer’s nonpayment of benefits and entitlements due under an employment agreement. The Court construes Count XI as asserting such a breach of contract claim against Plex so as "to do substantial justice." Mass.R.Civ.P. 8(f) ("All pleadings shall be so construed as to do substantial justice"). Accordingly, Plex’s motion to dismiss Count XI of Plaintiff’s Complaint is DENIED.
The Court simultaneously declines to construe Count XI as also asserting a claim under the Massachusetts Wage Act, G.L.c. 149, § § 148 and 150, because there is no evidence that Dr. Sukharevsky has pursued or fulfilled the statutory prerequisites to filing a private suit under that act. See G.L.c. 149, § 150. See also Depianti v. Jan-Pro Franchising Int’l, Inc., 465 Mass. 607, 611 (2013) ("Pursuant to § 150, an individual alleging a violation of G.L.c. 149, § 148 or 148B, may bring a private civil action ninety days after filing a complaint with the Attorney General, or sooner if the Attorney General assents to such suit").
Dr. Sukharevsky has not alleged, however, and the Court has no basis to infer that Mr. Selinger or Mr. Dupréalso were parties to any employment agreement that Dr. Sukharevsky had with Plex. Accordingly, Mr. Selinger and Mr. Dupré ’s motions to dismiss Count XI of Plaintiff’s Complaint are ALLOWED.