Warren v. Preti, Flaherty, Beliveau & Pachios, LLC

Full title: KAILE R. WARREN, JR., RENT-A-HUSBAND LLC, RENT-A-HUSBAND ENTERPRISES, LLC…

Court: STATE OF MAINE Cumberland, ss BUSINESS AND CONSUMER COURT

Date published: May 12, 2012

Docket No.: BCD-CV-11-28 (Me. May. 12, 2012)

Opinion

Docket No.: BCD-CV-11-28

05-12-2012

KAILE R. WARREN, JR., RENT-A-HUSBAND LLC, RENT-A-HUSBAND ENTERPRISES, LLC, and KW ENTERPRISES, INC., Plaintiffs, v. PRETI, FLAHERTY, BELIVEAU & PACHIOS, LLC, MARCUS, CREGG & MISTRETTA, P.A., and ACE HARDWARE CORP., Defendants

Counsel of Record Attorney Name Daniel Lilley, Esq. Tina Nadeau, Esq. John Aromando, Esq. Mark Porada, Esq. Peter DeTroy, Esq. Russel Pierce, Esq. Thimi Mina, Esq. Samuel Moulthrop, Esq. Party Name Kaile Warren, Jr. et al (Plaintiffs) Kaile Warren, Jr. et al (Plaintiffs) Preti, Flaherty, Beliveau & Pachios (Defendant) Preti, Flaherty, Beliveau & Pachios (Defendant) Marcus, Clegg & Mistretta (Defendant) Marcus, Clegg & Mistretta (Defendant) Ace Hardware Corp (Defendant) Ace Hardware Corp (Defendant)

A. M. Horton

Location: Portland

ORDER ON PLAINTIFFS' MOTION TO AMEND COMPLAINT

AND DEFENDANT ACE HARDWARE CORP.'S MOTION TO DISMISS

This Order addresses Defendant Ace Hardware Corp.'s motion to dismiss the amended complaint pursuant to Rule 12(b)(6) of the Maine Rules of Civil Procedure, and the subsequent motion of Plaintiffs Kaile R. Warren, Jr., Rent-A-Husband LLC, Rent-A-Husband Enterprises, LLC, and KW Enterprises, Inc. to amend their complaint for a second time.

Defendant Ace's motion to sever the claims against it from those against the other two defendants, citing M.R. Civ. P. 20 and 21 is addressed in a separate order. The court held oral argument on all pending motions in this case on October 12, 2011.

Ordinarily Ace's motion to dismiss would be addressed before the Plaintiffs' subsequent motion to amend, but that motion was directed to Plaintiffs' first amended complaint, which would be superseded if Plaintiffs' motion to amend were granted. Accordingly, the court focuses initially on the motion to amend, solely to determine whether leave to amend would be granted, without reference to the substantive sufficiency of the claims in the proposed second amended complaint. Then the court addresses the motion to dismiss, the question being whether any of the counts relating to Ace in either the first amended complaint or the proposed second amended complaint should be dismissed for failing to state a viable claim for relief against Ace.

1. The Standard for Granting Leave to Amend

After a responsive pleading is served, a plaintiff may amend its complaint "only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires." M.R. Civ. P. 15(a); see also Efstathiou v. Aspinquid, Inc., 2008 ME 145, ¶ 21, 956 A.2d 110, 118.¹ "Whether to allow a pleading amendment rests with the court's sound discretion." Holden v. Weinschenk, 1998 ME 185, ¶ 6, 715 A.2d 915, 917 (quoting Diversified Foods, Inc. v. First Nat'l Bank of Boston, 605 A.2d 609, 616 (Me. 1992)).

1 Plaintiffs assert that Ace is not entitled to object to their motion to amend because its motion to dismiss is not a "responsive pleading" for purposes of Rule 15(a). The court is inclined to agree with Ace's contrary position that a response of either an answer or a Rule 12 motion cuts off the complaining party's right to amend without leave of court, especially when the complaining party has already amended once as of right. The court assumes therefore that leave to amend is required, albeit under the "freely given" standard of Rule 15.

Courts should freely allow an amendment to a complaint except for bad faith, dilatory tactics, or undue delay resulting in prejudice to the opponent. Longley v. Knapp, 1998 ME 142, ¶ 19, 713 A.2d 939, 945. However, where "a proposed amended complaint would be subject to a motion to dismiss, the court is well within its discretion in denying leave to amend." See Glynn v. City of S. Portland, 640 A.2d 1065, 1067 (Me. 1994).

The proposed amended complaint does not add any claims against any of the defendants; it purports instead to clarify what the Plaintiffs claim to be the connections between the asserted actions of the several defendants. Only Defendant Ace opposes the Plaintiffs' proposed amendment, on the ground that granting the motion to amend would be futile in light of its motion to dismiss pursuant to M.R. Civ. P. 12(b)(6). But for that contention, the court would grant the motion to amend, because it has been timely made and does not cause any cognizable prejudice to any party. Therefore, the analysis turns to Ace's motion to dismiss to determine whether any of the counts against Ace should be dismissed.

2. Ace's Motion to Dismiss

The counts pertaining to Ace are as follows:

Count V: Defamation
Count VI: False Light
Count VII: Negligent Misrepresentation
Count VIII: Intentional Misrepresentation
Count IX: Intentional Infliction of Emotional Distress as to Plaintiff Warren²
Count X: Negligent Infliction of Emotional Distress as to Plaintiff Warren
Count XI: Vicarious Liability
Count XII: Punitive Damages
Count XIII: Economic Damages for Restitution
Count XIV: Promissory Estoppel

2 Counts IX to XIII are against all Defendants.

2 Counts IX to XIII are against all Defendants.

"In reviewing [] a motion to dismiss, [the court] consider[s] the facts in the complaint as if they were admitted." Bonney v. Stephens Mem. Hosp., 2011 ME 46, ¶ 16, 17 A.3d 123, 127. The court will "'examine the complaint in the light most favorable to the plaintiff to determine whether it sets forth elements of a cause of action or alleges facts that would entitle the plaintiff to relief pursuant to some legal theory.'" Id. (quoting Saunders v. Tisher, 2006 ME 94, ¶ 8, 902 A.2d 830, 832). '"Dismissal is warranted when it appears beyond a doubt that the plaintiff is not entitled to relief under any set of facts that he might prove in support of his claim.'" Id.

The Maine Rules of Civil Procedure incorporate principles of notice pleading. See e.g., Burns v. Architectural Doors & Windows, 2011 ME 61, ¶ 21, 19 A.3d 823, 829. Rule 8 calls for "1) a short and plain statement of the claim showing that the pleader is entitled to relief and (2) a demand for judgment for the relief which the pleader seeks." M.R. Civ. P. 8; see also Bean v. Cummings, 2008 ME 18, ¶ 8, 939 A.2d 676, 679 (discussing pleading requirements in light of recent United States Supreme Court decisions, and noting that Rule 9(b) identifies certain claims that require a heightened pleading standard such as fraud or mistake). Notice pleading requires the plaintiff to provide the opposing party with "fair notice of the claim." Polk v. Town of Lubec, 2000 ME 152, ¶ 18, 756 A.2d 510, 514 (quoting E.N. Nason, Inc. v. Land-Ho Dev. Corp., 403 A.2d 1173, 1177 (Me. 1979)).³

3 Maine Rule of Civil Procedure 8 mirrors its federal counterpart, but Maine has yet to adopt federal pleading requirements for civil cases, contrary to Ace's argument under Ashcroft v. Iqbal, 129 S. Ct 1937, 173 L. Ed 2d 868, (2009). Indeed, as the Supreme Judicial Court of Maine, sitting as the Law Court, has noted on occasion, Maine rules of procedure are not necessarily to be given the same interpretation as identically worded federal rules of procedure. See e.g. State of Maine v. Dumond, 2000 ME 95, ¶ 10, 751 A.2d 1014, 1017 (stating that although Maine Rule of Criminal Procedure 30(b) tracks the counterpart federal rule, Maine does not follow the federal rule's same strict requirements); Mondello v. General Elec. Co., 650 A.2d 941, 944 (Me. 1994) (stating that federal court interpretations of federal rules provide guidance, but are not binding, on Maine courts' interpretation of counterpart Maine rules).

With that framework in mind, the analysis turns to the specific counts of the complaint.

Count V: Defamation

The Plaintiffs allege that Ace made defamatory statements to the investigators in State of Maine Office of Securities and the Maine Attorney General's Office during the pendency of the criminal investigation against them. They allege that the statements were related to the "scope and extent of the relationship between [the parties]; the success of the Rent-A-Husband tested partnerships; and [] Ace's interest in obtaining an ownership stake in Rent-A-Husband including, but not limited to, statements claiming Ace [] did not have a longstanding working partnership with Rent-A-Husband; that the Rent-A-Husband testing was not that successful; and that Defendant Ace was not seriously interested in a buy-in or buy-out of Rent-A-Husband and did not represent to Plaintiffs that it was." (Compl. ¶ 163.) Ace claims that the statements were not defamatory, and further argues that they were absolutely privileged as they were made during a judicial proceeding.

In order to survive a motion to dismiss, a complaint for defamation must allege the following elements: a false and defamatory statement concerning another; an unprivileged publication to a third party; fault amounting at least to negligence on the part of the publisher; and actionability irrespective of special harm or the existence of special harm caused by the publication. Cole v. Chandler, 2000 ME 104, ¶ 5, 752 A.2d 1189, 1193; Vahlsing Christina Corp. v. Stanley, 487 A.2d 264, 267 (Me. 1985).

The Law Court has stated:

Any person has a qualified privilege to make statements to law enforcement or regulatory agencies regarding the conduct of others, where the person making the statement believes in good faith that the statement is true and indicates that a statutory standard administered by the agency may have been violated.

Truman v. Browne, 2001 ME 182, ¶ 15, 788 A.2d 168, 172. This conditional privilege, however, is lost where the defendant abuses the privilege. Lester, 596 A.2d at 69; see also Cole, 2000 ME 104, ¶ 7, 752 A.2d at 1194 (noting that "[w]hether the defendant abused his privilege is a question of fact"|j and o^nce it is determined that the defendant is entitled to the privilege, the burden shifts to the plaintiff "to come forward with evidence that could go to a jury that [the defendant] abused the privilege") (citing Rippett v. Bemis, 672 A.2d 82, 87 (Me. 1996) and Gautschi v. Maisel, 565 A.2d 1009, 1011 (Me. 1989)).

As "[a] motion to dismiss a complaint for failure to state a claim should not be granted if the pleading alleges facts which would entitle the plaintiff to relief upon some theory, or if it avers every essential element of a claim," see Vahlsing Christina Corp. v. Stanley, 487 A.2d 264, 267 (Me. 1985). Whether Ace's allegedly defamatory statements were privileged is a question of fact. Because the Plaintiffs have alleged the elements of a defamation claim, Ace's motion must be denied as to Count V.

Count VI: False Light

Plaintiffs also allege that Ace made statements that portrayed them in a false light with the public.

One who gives publicity to a matter concerning another that places the other before the public in a false light is subject to liability to the other for invasion of his privacy, if (a) the false light in which the other was placed would be highly offensive to a reasonable person, and (b) the actor had knowledge of or acted in reckless disregard as to the falsity of the publicized matter and the false light in which the other would be placed. Restatement (Second) of Torts § 652E (1977).

Cole v. Chandler, supra, 2000 ME 104, ¶ 17, 752 A.2d at 1197.

Plaintiffs allege that Ace made false statements to the media concerning the scope and extent of its business relationship with Plaintiffs; Ace's interest in obtaining an ownership stake in Rent-A-Husband; and Ace's knowledge of Rent-A-Husband investors, and allege further that these statements placed Plaintiffs in a light that would be highly offensive to a reasonable person. Further, Plaintiffs assert that Ace made the statements knowing they were false, or in reckless disregard of their falsity, and that the Plaintiffs suffered various forms of harm and damages as a result.

Ace argues that the only alleged offensive statement that Plaintiffs could possibly be referring to is its Media Statement issued in response to news reports in 2009 in which Plaintiffs made unfavorable statements about Ace. Ace asserts that its Media Statement was issued in order to protect its business reputation from these unfavorable statements, and requests that the court consider the attached documentation of these statements in making its decision.

The general rule is that only the facts alleged in the complaint may be considered on a motion to dismiss. Moody v. State Liquor and Lottery Comm.'n, 2004 ME 20, ¶ 8, 843 A.2d 43, 47. However, Rule 12(b) states that "[i]f, on a motion asserting the defense numbered (6) to dismiss for failure of the pleading to state a claim upon which relief can be granted, matters outside the pleadings are presented to and not excluded by the court, the motion shall be treated as one for summary judgment." M.R. Civ. P. 12(b) (emphasis added). Whether the court accepts documents, additional factual claims, and other evidence is a discretionary determination. In this case, for the court to accept and consider Ace's additional materials or its characterization of the basis of Count VI as necessarily being limited to those statements would require Plaintiffs to be given leave to provide more material, and would in effect convert a Rule 12(b)(6) motion into a Rule 56 summary judgment procedure, without the benefit of the filings required by Rule 56 to help narrow or eliminate factual issues. Thus, the court declines to consider the extrinsic material tendered by Ace and limits review to the face of Plaintiffs' pleading.

Assessing Count VI under the Rule 12(b)(6) standard, the court concludes that the Plaintiffs have adequately alleged a claim for false light. See Burns, 2011 ME 61, ¶ 21, 19 A.3d at 829 (noting Maine's "forgiving" notice pleading standard, and recognizing that "an initial pleading may be presented in general terms," however, "by the time the parties are addressing a motion for summary judgment, a plaintiff must be prepared to clearly identify the asserted cause or causes of action and the elements of each claim," . . . [as w]ithout such definition, the parties may waste time and money litigating extraneous issues not generated by the pleadings"). Accordingly, Ace's motion to dismiss must be denied as to Count VI.

Counts VII and VIII: Negligent and Intentional Misrepresentation

In Rand v. Bath Iron Works Corp., 2003 ME 122, ¶ 13, 832 A.2d 771, the Law Court addressed both claims for intentional misrepresentation and negligent misrepresentation.

To prevail on a claim for intentional misrepresentation,

the plaintiff must prove by clear and convincing evidence: (1) that the defendant made a false representation, (2) of a material fact, (3) with knowledge of its falsity or in reckless disregard of whether it is true or false, (4) for the purpose of inducing the plaintiff to act in reliance upon it, and, (5) the plaintiff justifiably relied upon the representation as true and acted upon it to the plaintiffs damage.

Rand v. Bath Iron Works Corp., 2003 ME 122, ¶ 9, 832 A.2d 771, 773. "When a plaintiff alleges a failure to disclose rising to the level of a misrepresentation, the plaintiff must prove either (1) active concealment of the truth, or (2) a specific relationship imposing on the defendant an affirmative duty to disclose." Fitzgerald v. Gamester, 658 A.2d 1065, 1069 (Me. 1995).

The Law Court has adopted the following definition of negligent misrepresentation:

One who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.

Rand v. Bath Iron Works Corp., 2003 ME 122, ¶ 13, 832 A.2d 771, 774 (emphasis omitted) (quoting Restatement (Second) Torts § 552(a)(1)).

Plaintiffs allege that Ace performed a successful corporate test of the pilot model partnership that resulted in further purchases of Rent-A-Husband franchises by Ace franchises. They also allege that Ace "repeatedly expressed to plaintiffs its interest and then its intention of purchasing Rent-A-Husband outright, or alternatively, of obtaining a controlling financial interest in Rent-A-Husband;" that at least two meetings were held between Ace and Warren on the subject; that Ace knew of Plaintiffs' efforts in raising business capital through a private offering, and that Ace met with investors as well as the SBA for purposes of securing funding to facilitate the proposed buy-in or buy-out. Plaintiffs allege that Ace made false representations to them for the purpose of inducing them to act or refrain from acting.

Plaintiffs also claim that once Ace stopped the buy-in and buy-out negotiations, it continued to communicate with the Plaintiffs through funding, advice, counsel, and research and advertising assistance. Plaintiffs claim that these representations caused them to take "innumerable steps and/or measures in its business to facilitate the Ace buy-in or buy-out," and that when Ace decided not to pursue an ownership interest it caused a material change to the business and affected potential investors' interest, resulting in the Plaintiffs' loss of income and business opportunities.

Ace argues that the Plaintiffs' claim is barred because it is based on an alleged promise of future performance. Although claims for intentional and negligent misrepresentation both generally require that the defendant's misrepresentation be based on a past or existing fact, not merely a statement of opinion or a promise of future performance, in certain circumstances '"the relationship of the parties . . . may transform into an averment of fact that which under ordinary circumstances would be merely an expression of opinion.'" Wildes v. Pens Unlimited Co., 389 A.2d 837, 840 (Me. 1978) (citing Shine v. Bodge, 130 Me. 440, 444, 157 A. 318, 319 (1931)). No such relationship is alleged here.⁴ Therefore, were the Plaintiffs alleging only misrepresentation of future performance, Ace's motion would likely be granted.

4 "In order to survive a motion to dismiss a claim for breach of fiduciary duty, the plaintiff must set forth specific facts constituting the alleged relationship with sufficient particularity to enable the court to determine whether, if true, such facts could give rise to a fiduciary relationship." Fortin v. Roman Catholic Bishop of Portland, 2005 ME 57, ¶ 26, 871 A.2d 1208, 1218. A fiduciary duty is created when "one standing in a fiduciary relation with another is subject to liability to the other for harm resulting from a breach of duty imposed by the relation." Bryan R. v. Watchtower Bible and Tract Soc'y of New York, Inc., 1999 ME 144, ¶ 15, 738 A.2d 839, 845 (quoting RESTATEMENT (SECOND) OF TORTS 874 (1965)). The Plaintiffs have not established sufficient facts supporting the allegation that a fiduciary relationship existed between Plaintiffs and Ace simply because there were ongoing business discussions. See e.g., Clappison v. Foley, 148 Me. 492, 497-99, 96 A.2d 325, 327-28 (1953) (noting that where the complaint does not demonstrate evidence of a fiduciary relationship, but instead only conventional business dealings, the motion to dismiss must be granted).

However, Plaintiffs allege that Ace intentionally or with reckless disregard or negligently supplied false information as to existing facts for Plaintiffs' guidance in their business transactions, for the purpose of inducing the Plaintiffs to act and/or refrain from acting, and which did induce such reliance. Accordingly, Ace's motion must be denied as to Counts VII and VIII.⁵

5 Ace's memorandum does not specifically assert that Plaintiffs' claim for intentional misrepresentation is insufficiently pleaded for purposes of M.R. Civ. P. 9(b). See e.g., Diversified Foods, Inc. v. First Nat'l Bank, 605 A.2d 609, 615 (Me. 1992).

Count IX: Intentional Infliction of Emotional Distress as to Plaintiff Warren

To prevail in an action for intentional infliction of emotional distress (IIED), a plaintiff must establish that:

(1) the defendant intentionally or recklessly inflicted severe emotional distress or was certain or substantially certain that such distress would result from [its] conduct; (2) the conduct was so extreme and outrageous as to exceed all possible bounds of decency and must be regarded as atrocious, utterly intolerable in a civilized community; (3) the actions of the defendant caused the plaintiffs emotional distress; and (4) the emotional distress suffered by the plaintiff was so severe that no reasonable [person] could be expected to endure it.

Curtis v. Porter, 2001 ME 158, ¶ 10, 784 A.2d 18, 22-23. "A person acts recklessly if [he] knows or should know that [his] conduct creates an unreasonable risk of harm to another person and the unreasonableness of [his] actions exceeds negligence." Id.

Moreover, severe emotional distress "means emotional distress, created by the circumstances of the event, that is so severe that no reasonable person could be expected to endure it." Botka v. S.C. Noyes & Co., 2003 ME 128, ¶ 17, 834 A.2d 947, 952. Finally, in an IIED claim, the court determines "in the first instance whether the defendant's conduct may reasonably be regarded as so extreme and outrageous to permit recovery." Champagne v. Mid-Maine Med. Ctr., 1998 ME 87, ¶ 16, 711 A.2d 842, 847 (internal quotations omitted) (citations omitted).

Plaintiff Kaile Warren's IIED claim is based on the allegations of misrepresentations regarding the purchasing of an ownership interest in Rent-A-Husband and the alleged defamatory and false light statements Ace made about Rent-A-Husband. Ace's characterization of the circumstances as being insufficient may well prevail on a more fully developed factual record—after all, Plaintiff Warren's claim arises out of a business transaction or series of transactions rather than a situation that is by definition emotionally charged, such as a bereavement or a family conflict. See Latremore v. Latremore, 584 A.2d 626, 631 (Me. 1990) (finding that where the son was aware of the plaintiff parents' age and poor health, yet still made cruel remarks to them and sought to have his father committed, his conduct was extreme and outrageous); Rubin v. Matthews International Corp., 503 A.2d 694, 699-700 (Me. 1986) (concluding that whether defendant's repeated misrepresentations to the plaintiff that the headstone she purchased would be delivered in time for the funeral of a loved one was extreme and outrageous conduct was an issue of fact for the jury).

On the other hand, Plaintiff Warren alleges much more than just the failure of a business plan—he asserts that Ace's actions contributed to his criminal prosecution and the destruction of his business. Viewed in a light most favorable to Plaintiff Warren, as it must be at this stage, Count IX states a cognizable claim for IIED. Champagne, 1998 ME 87, ¶ 16, 711 A.2d at 847 (citing Loe v. Town of Thomaston, 600 A.2d 1090, 1093 (Me. 1998)).

Accordingly, Ace's motion is denied as to Count IX.

Count X: Negligent Infliction of Emotional Distress as to Plaintiff Warren

In Count X Warren alleges a claim of negligent infliction of emotional distress (NIED).⁶ There is no general duty to avoid negligently causing emotional harm to others. Curtis v. Porter, 2001 ME 158, ¶ 18, 784 A.2d 18, 25. In Maine, independent claims for NIED has been recognized only in so-called bystander situations or when a special relationship exists between the actor and the person emotionally harmed. Id. ¶ 19, 784 A.2d at 25-26. Plaintiff Warren has not alleged bystander status nor has he sufficiently alleged the existence of a special relationship on which to base an independent claim for NIED. Ace's motion is granted as to Count X.

6 This claim also may well amount to surplusage in light of the IIED and defamation claims as there can only be one recovery for the same loss or damage. See Theriault v. Swan, 558 A.2d 369, 372 (Me. 1989).

Count XI: Vicarious Liability

Ace seeks to dismiss Count XI on the grounds that vicarious liability is not a separate and distinct cause of action, "but a theory of imputation by which an employer may be held responsible for the tortious acts of its employees." Frank v. L.L. Bean, Inc., 352 F. Supp. 2d 8, 14 (D. Me. 2005) (citations omitted). "Since vicarious liability is only meaningful insofar as it is asserted in support of a valid cause of action," id., Count XI fails to state a cognizable independent and freestanding claim, and must be dismissed under Rule 12(b)(6). Plaintiffs can still seek to hold Ace vicariously liable for acts or omissions of its employees and agents on those claims against Ace that survive dismissal.

Count XII: Punitive Damages

Ace also seeks to dismiss Count XII on the grounds that punitive damages constitute a remedy, not a separate cause of action, and that even when viewing the facts of the complaint in a light most favorable to the plaintiff, they would not support an award of punitive damages.

Ace "is correct that punitive damages is not a separate and distinct cause of action under Maine law. Rather, it is a type of remedy." Frank v. L.L. Bean, Inc., 352 F. Supp. 2d 8, 14 (D. Me. 2005) (citing Southport Marine, LLC v. Gulf Oil Limited Partnership, 234 F.3d 58, 64 (1st Cir. 2000); Connors v. Town of Brunswick, Civil No. 99-331-P-C, 2000 U.S. Dist. LEXIS 12253, *40 (D. Me. Aug. 16, 2000)). Accordingly, Count XII must be dismissed.

Plaintiffs have sought punitive damages in their prayers for relief, and may pursue an award of such damages on their IIED and intentional misrepresentation claims if the predicate showing of malice—express or implied—is made. Tuttle v. Raymond, 494 A.2d 1353 (Me. 1985); see also Morgan v. Kooistra, 2008 ME 26, ¶ 29, 941 A.2d 447, 455.⁷

7 Malice may be proven through evidence showing either that the party acted with ill will toward the claimant or that the party's conduct was so outrageous that malice can be implied. Id. at 1361. Thus, any lesser state of mind, such as gross negligence or recklessness, is insufficient to allow a punitive damages award. Id. at 1361-62 (noting that a gross negligence or reckless requirement "covers too broad and too vague an area of behavior, resulting in an unfair and inefficient use of the doctrine of punitive damages" that would "allow virtually limitless imposition of punitive damages," and would dull "the potentially keen edge of the doctrine as an effective deterrent of truly reprehensible conduct"). Accordingly, punitive damages are only available if a defendant acts with actual or implied malice. Id. Implied malice is defined as more than a "mere reckless disregard of the circumstances." Id. at 1361. The clear and convincing standard of proof aids in ensuring that punitive damages are not inappropriately awarded. Batchelder v. Realty Res. Hospitality, LLC, 2007 ME 22, ¶ 13, 914 A.2d 1116, 1124.

Count XIII: Economic Damages For Restitution

The Plaintiffs claim that the defendants "directly and/or proximately caused the actual damages to Plaintiffs of a Consent Judgment requiring Plaintiffs to pay a maximum of $1,994,657.08 in restitution to the State of Maine." Under Maine law, a restitution claim is premised on the equitable doctrine of unjust enrichment. Count XIII fails to allege that the alleged restitutionary payment to the State benefited or unjustly enriched Ace.

Thus, what purports to be an independent, freestanding claim in Count XIII is more properly characterized as an element of Plaintiffs' alleged damages under some of their other counts against Ace. Ace's motion is granted as to Count XIII, but Plaintiffs remain able to pursue recovery of the alleged restitution payment under at least some of their remaining theories of liability.

Count XIV: Promissory Estoppel

Ace has also moved to dismiss the Plaintiffs' promissory estoppel claim against it, alleging that it made no promises to the Plaintiffs, and even if it did, the promises alleged are barred by the Statute of Frauds because they could not have been performed in one year and they were not in writing.

The Law Court, in Harvey v. Dow, clarified that Maine has
adopted the definition of promissory estoppel set out in the Restatement (Second) of Contracts, which states: A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires. Restatement (Second) of Contracts § 90(1) (1981); Bracale v. Gibbs, 2007 ME 7, ¶ 14, 914 A.2d 1112, 1115.

2008 ME 192, ¶ 11, 962 A.2d 322, 325. Although "promissory estoppel applies to promises that are otherwise unenforceable, [it] cannot be applied to avoid the statute of frauds requirement. . ." Daigle Commer. Group, Inc. v. St. Laurent, 1999 ME 107, ¶ 14, 734 A.2d 667, 672 (noting that promissory estoppel cannot be used to avoid the statute of frauds in employment contracts exceeding one year) (internal citations and quotations omitted); see also Wells Fargo Home Mortg, Inc. v. Spaulding 2007 ME 116, ¶ 23, 930 A.2d 1025, 1030. Plaintiffs assert that Ace's alleged promises are not subject to the Statute of Frauds by alleging the doctrine of partial performance, specifically that Rent-A-Husband, in reliance on the promises made by Ace, gave up other business opportunities.

Part performance in reliance on an otherwise unenforceable contract can remove the contract from the ambit of the Statute of Frauds "if it is established that the party seeking enforcement, in reasonable reliance on the contract and on the continuing assent of the party against whom enforcement is sought, has so changed his position that injustice can be avoided only by specific enforcement." Gage v. Stevens, 1997 ME 88, ¶ 14, 696 A.2d 411, 416, quoting RESTATEMENT (SECOND) OF CONTRACTS § 129 (1981), see Busque v. Marcou, 147 Me. 289, 294-95, 86 A.2d 873 (1952).

It is doubtful that the Plaintiffs can recover damages against Ace, because their remedy is likely limited to the benefit of the bargain or their expenditures incurred in reliance, as opposed to the value of alleged lost opportunities elsewhere. However, because Plaintiffs have alleged reasonably specific promises by Ace and detrimental reliance by them, the allegations of Count XIV could, if proved, entitle the Plaintiffs to relief of some kind. For that reason, Ace's motion is denied as to Count XIV.

For the reasons stated it is ORDERED AS FOLLOWS:

Plaintiffs' Motion to Amend is granted except as to Count X for negligent inflection of emotional distress, Count XI for vicarious liability, Count XII for punitive damages, and Count XIII for economic damages for restitution. Defendant Ace Hardware Corp.'s Motion to Dismiss is granted as to Counts X, XI, XII and XIII and is otherwise denied.

Pursuant to M.R. Civ. P. 79, the clerk shall incorporate this order into the docket by reference.

Dated: October 25, 2011

_________________

A. M. Horton

Justice, Business and Consumer Court

BUSINESS AND CONSUMER COURT

Kaile R. Warren, Jr. et al v. Preti, Flaherty, Beliveau & Pachios,

LLC et al

BCD-CV-2011-28

Counsel of Record

Attorney Name

Daniel Lilley, Esq.

Tina Nadeau, Esq.

John Aromando, Esq.

Mark Porada, Esq.

Peter DeTroy, Esq.

Russel Pierce, Esq.

Thimi Mina, Esq.

Samuel Moulthrop, Esq.

Party Name

Kaile Warren, Jr. et al (Plaintiffs)

Kaile Warren, Jr. et al (Plaintiffs)

Preti, Flaherty, Beliveau & Pachios

(Defendant)

Preti, Flaherty, Beliveau & Pachios

(Defendant)

Marcus, Clegg & Mistretta

(Defendant)

Marcus, Clegg & Mistretta

(Defendant)

Ace Hardware Corp (Defendant)

Ace Hardware Corp (Defendant)

Location: Portland

Docket No.: BCD-CV-11-28

KAILE R. WARREN, JR., RENT-A-HUSBAND LLC, RENT-A-HUSBAND ENTERPRISES,

LLC, and KW ENTERPRISES, INC., Plaintiffs,

v.

PRETI, FLAHERTY, BELIVEAU & PACHIOS, LLC, MARCUS, CREGG & MISTRETTA, P.A.,

and ACE HARDWARE CORP., Defendants

ORDER ON DEFENDANT ACE HARDWARE CORPORATION'S

MOTION TO SEVER

Defendant Ace Hardware Corporation (Ace) moves, pursuant to M.R. Civ. P. 20 and 21, to sever the Plaintiffs' claims relating to it from those relating to the other two Defendants, Preti, Flaherty, Beliveau & Pachios, LLC (Preti) and Marcus, Clegg & Mistretta, P.A. (MCM). Plaintiffs Kaile R. Warren, Jr., Rent-A-Husband LLC, Rent-A-Husband Enterprises, LLC, and KW Enterprises, Inc. oppose the motion, but neither Preti nor MCM objects to the motion to sever.⁸ The court heard oral argument on the motion on October 12, 2011.

8 Preti has requested that should the court grant the motion to sever, that the court also issue a protective discovery order to prohibit duplicative discovery in the two proceedings.

FACTUAL BACKGROUND

A motion to sever for misjoinder may be brought at any point in the action. See M.R. Civ. P. 21. At this early stage in the litigation, the only alleged facts that have been presented to the court upon which to base its decision are those in the Second Amended Complaint. Those allegations are summarized below, initially as to the law firm defendants and then as to Ace.

Factual Allegations Pertaining to Preti and MCM

Plaintiff Kaile Warren is the majority owner and controller of the Plaintiff corporate entities, Rent-A-Husband LLC, Rent-A-Husband Enterprises, LLC, and KW Enterprises, Inc. (Corporate Plaintiffs). (Compl. ¶ 1.)⁹ In approximately April 2000, Preti began representing the Corporate Plaintiffs as corporate counsel and Warren as personal counsel. (Compl. ¶¶ 11, 13.) In 2002, after allegedly following advice from counsel, Plaintiffs began to raise business capital for Rent-A-Husband through a private offering that was designed and overseen by Preti. (Compl. ¶¶ 24-25.) Promissory notes and subscription agreements were issued through Plaintiffs Rent-A-Husband LLC and KW Enterprises, Inc. as part of the private offering. (Compl. ¶ 28.)

9 All citations are to the Second Amended Complaint filed with Plaintiffs motion to amend, which is granted in a separate order.

Plaintiffs allege that despite organizing and designing the private offering, Preti failed to ensure that the Rent-A-Husband private offering complied with all state and federal securities laws, to advise Plaintiffs to properly register promissory notes in compliance with the Maine Uniform Securities Act, to inform the Plaintiffs of the requirements for securities registration and licensing. (Compl. ¶¶ 28-31, 33-35.) After the SBA, with whom Plaintiffs were negotiating to obtain funding for the purpose of facilitating buy-in, buy-out of Rent-A-Husband by Ace, called into question the legality of the private offering in 2007 or 2008, Preti withdrew from further legal representation of Plaintiffs effective May 6, 2008. (Compl. ¶¶ 37-38, 44.)

Preti referred Plaintiffs to MCM, who, in June 2008, began representing the Plaintiffs as their corporate counsel and securities investigation counsel and acted as personal counsel to Warren regarding corporate matters, the securities investigation, and the eventual criminal case, which the State of Maine Office of Securities began investigating in the summer of 2008. (Compl. ¶¶ 46, 56-58.)

Plaintiffs allege that MCM inappropriately advised the Plaintiffs that Warren could properly and lawfully issue personal promissory notes to raise business capital for Rent-A-Husband. (Compl. ¶ 74.) Plaintiffs also allege that MCM inappropriately advised them to waive their attorney-client privilege with Preti and waive their Fifth Amendment rights. Plaintiffs also assert that MCM advised them to produce voluntarily information and records to the State of Maine that MCMC had not reviewed beforehand, despite knowing that these statements could be used against the Plaintiffs. (Compl. ¶¶ 48-49, 66, 68, 70-71.) Plaintiffs state that deficient legal advice led to the civil enforcement and criminal actions being brought. (Compl. ¶¶ 75, 77.) In January 2010, MCM moved to withdraw from further legal representation of the Plaintiffs based on a conflict of interest. (Compl. ¶ 78.)

As a result of the securities investigation, on December 11, 2009, plaintiff Warren was indicted for criminal violations of law stemming from the Rent-A-Husband private offering. (Compl. ¶ 51.) While the criminal matter was still pending the State of Maine filed a civil enforcement action against the Plaintiffs alleging securities violations. (Compl. ¶ 52.) On February 23, 2011, a consent judgment was entered into with the Plaintiffs, pursuant to which the criminal prosecution was dismissed with prejudice and Plaintiffs agreed to pay restitution to the State of Maine for the Rent-A-Husband investments of $1,994,657.08 plus interest. (Compl. ¶¶ 54-55.)

Facts Pertaining to Ace

Between 2002 and 2008, Plaintiffs had a profitable partnership with Ace of Rent-A-Husband franchises within Ace stores in Maine, New Hampshire, and Massachusetts. (Compl. ¶¶ 79-82, 85.) Plaintiffs claim that Ace repeatedly expressed to Plaintiffs its interest and intention of purchasing Rent-A-Husband outright or, alternatively, of obtaining a controlling financial interest in it. (Compl. ¶ 87.) In November 2007, and again in January 2008, Ace met with Warren to discuss the potential buy-out or buy-in. (Compl. ¶ 88.)

Plaintiffs claim that Ace knew or reasonably should have known that Plaintiffs were continuing to raise business capital through a Rent-A-Husband private offering. (Compl. 90.) Ace met with a number of Rent-A-Husband investors, and negotiated some investors for Rent-A-Husband. (Compl. ¶ 91.) Ace also spoke with individuals at the SBA regarding the proposed partnership to help secure funding for Rent-A-Husband, and to facilitate the buy-in or buy-out of Rent-A-Husband. (Compl. ¶ 92.)

In March of 2008, Plaintiffs claim that Ace suddenly put the ownership stake of Ace in Rent-A-Husband on hold. (Compl. ¶ 93.) Although the potential buy-in or buy-out was suspended, Ace continued to stay in contact with the Plaintiffs and continued to state that the partnership would still happen. (Compl. ¶ 94.) Ace did this by issuing a letter acknowledging the success of the partnership between Rent-A-Husband and Ace, advising and encouraging Ace franchise stores to buy Rent-A-Husband franchises, and by providing Plaintiffs with funding, advise, counsel, research, and advertising assistance. (Compl. ¶ 95.) Plaintiffs claim they took innumerable steps to facilitate the buy-in or buy-out based on the repeated representations by Ace, but Ace never purchased an ownership stake in Rent-A-Husband although its franchise stores continues to have Rent-a-Husband franchises. (Compl. ¶¶ 97-99.) Plaintiffs allege that the issues regarding the legality of the private offering, the withdrawal of Preti as Plaintiffs' counsel, and the securities investigation all affected Ace's interest in obtaining an ownership stake in Rent-A-Husband. (Compl. ¶¶ 103-105.)

Plaintiffs claim that on or about October 2009, Ace made false statements to the media concerning the scope and extent of its business relationship with Plaintiffs, Ace's interest in obtaining an ownership stake in Rent-A-Husband, and Ace's knowledge of Rent-A-Husband investors. (Compl. ¶ 108.) Plaintiffs assert that the false statements further fueled the securities investigation that resulted in criminal indictments and a civil enforcement action. (Compl. ¶ 109.) Plaintiffs also claim that during the pendency of the criminal prosecution, Ace made false statements to the Maine Securities Investigators and the Maine Attorney General's Office regarding the scope and extent of the relationship between Ace and Rent-A-Husband, the success of the tested pilot partnership, and Ace's interest in obtaining an ownership stake in Rent-A-Husband. (Compl. ¶ 110.) Plaintiffs claim this further fueled the securities investigation, criminal prosecution, and civil prosecution of Plaintiffs. (Compl. ¶ 110.)

PROCEDURAL BACKGROUND

Plaintiffs initiated this litigation in Cumberland County Superior Court on March 22, 2011, by filing a thirteen-count complaint alleging: 1) professional negligence (Count I) and breach of fiduciary duty (Count II) against Preti; 2) professional negligence (Count III) and breach of fiduciary duty (Count IV) against MCM; 3) defamation (Count V), false light (Count VI), negligent misrepresentation (Count VII), and intentional misrepresentation (Count VIII) against Ace; and 4) intentional infliction of emotional distress (Count IX), negligent infliction of emotional distress (Count X), vicarious liability (Count XI), punitive damages (Count XII), and "economic damages for restitution" (Count XIII) against all three defendants. On April 20, 2011, Plaintiffs amended their complaint and added a claim for promissory estoppel (Count XIV) against Ace. Both Preti and MCM filed answers to the First Amended Complaint. The case was assigned to Justice Wheeler.

Ace did not file an answer to the First Amended Complaint; instead, on May 2, 2011, Ace filed a M.R. Civ. P. 12(b)(6) motion to dismiss all claims against it along with its motion to sever. Justice Wheeler heard oral argument on the motion to dismiss and the motion to sever on August 4, 2011. On August 12, 2011, Plaintiffs moved to amend their complaint for a second time. Before any ruling on the pending motions could issue, the case was accepted for transfer to the Business Court on September 14, 2011. The court granted Plaintiffs' motion to amend in an order dated October _, 2011.

DISCUSSION

Ace seeks, pursuant to M.R. Civ. P. 20 and 21, to sever the claims against it from the claims brought against Preti and MCM, essentially arguing that they were misjoined in the litigation. (See generally M. Sever.) Broadly, Ace argues that the basis for the claims against Preti and MCM are unrelated to the claims against Ace and thus joinder was improper. Ace has indicated throughout the pleadings that it intends to remove the case to federal district court should the severance be granted, and thus has requested a ruling on the motion to sever prior to the motion to dismiss. Plaintiffs counter that the Complaint sets forth facts establishing that Plaintiff Warren and the Corporate Plaintiffs began a successful business venture with Ace, Preti and MCM were hired to help grow that business through raising capital, and over the same time period and through various means, the Defendants together played a substantial role in destroying Plaintiffs' business enterprise.¹⁰

10 Plaintiffs also argue that Ace is a necessary party pursuant to M.R. Civ. P. 19, because Ace, Preti, and MCM have caused a total, indivisible injury to the Plaintiffs, that culminated from all of the Defendants' conduct. Even were that the case, it would necessarily mean that Ace is a necessary party pursuant to M.R. Civ. P. 19. Even presuming some form of joint liability, joint tortfeasors are not indispensable parties under Rule 19. See Lebel v. Regan, 192 A.2d 28, 30-31, 159 Me. 300, 304 (1963) (cited in 2 C. Harvey, MAINE CIVIL PRACTICE § 19.1 at 560n.l2 (3d ed. 2011)).

Pursuant to M.R. Civ. P. 21, "[p]arties may be dropped or added by order of the court on motion of any party . . . at an stage of the action and on such terms as are just. Any claim against a party may be severed and presented separately." Because the Maine rule regarding severance is essentially identical to the federal rule,¹¹ it is proper for the court to consider constructions of the federal rule to aid in construing and analyzing the parallel Maine provision. See Bean v. Cummings, 2008 ME 18, ¶ 11, 939 A.2d 676, 680. Severance pursuant to Rule 21 provides a mechanism for dropping defendants when the requirements of permissive joinder under Rule 20 have not been met. See McCormick v. Festiva Dev. Grp., LLC, 269 F.R.D. 59, 60 (D. Me. 2010); 7 Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 1683 at 475 (3d ed. 2001). Thus to succeed on a motion to sever, Ace must show they were improperly joined in this matter.

11 The federal rule on severance provides: "Misjoinder of parties is not a ground for dismissing an action. On motion or on its own, the court may at any time, on just terms, add or drop a party. The court may also sever any claim against a party." Fed. R. Civ. P. 21.

The Maine Rules of Civil Procedure promote the free joinder of claims and parties to effectuate "the just, speedy and inexpensive determination of every action. M.R. Civ. P. 1; see also M.R. Civ. P. 18, 20; 1 Field, McKusick, & Wroth, Maine Civil Practice § 18.1 at 359-60 (2d ed. 1970). The rule on permissive joinder of parties provides:

All persons may be joined in one action as defendants if there is asserted against them jointly, severally, or in the alternative, any right to relief within the subject-matter jurisdiction of the court in respect of or arising out of the same transaction, occurrence, or series of transactions or occurrences and if any question of law or fact common to all defendants will arise in the action.¹²

M.R. Civ. P. 20(a) (emphasis added). The so-called "same transaction prong" and the "common question prong" of Rule 20 are cumulative requirements. See 7 Federal Practice and Procedure § 1653 at 403-04.

12 The federal rule on permissive joinder is nearly identical to the Maine rule; it allows for the joinder of defendants in one action if "any right to relief is asserted against them jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences; and . . . any question of law or fact common to all defendants will arise in the action." Fed. R. Civ. P. 20(a)(2).

12 The federal rule on permissive joinder is nearly identical to the Maine rule; it allows for the joinder of defendants in one action if "any right to relief is asserted against them jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences; and . . . any question of law or fact common to all defendants will arise in the action." Fed. R. Civ. P. 20(a)(2).

In its motion to sever, Ace argues that Plaintiffs have not shown that the claims against them do not arise out of the same transaction or involve common questions of law or fact as those claims alleged against Preti and MCM. Although Ace attacks both prongs of permissive joinder, it is clear that at a minimum there are common questions of fact in the assessment of damages, as Plaintiffs seek similar types of damages from Ace, Preti, and MCM and allege that all Defendants caused a single indivisible harm to the Plaintiffs. See Wyatt v. Charleston Area Med. Ctr., Inc., 651 F. Supp. 2d 492, 498 (S.D. W. Va. 2009) (explaining how apportionment of damages between defendants is a common question of fact). Thus, whether or not joinder is proper is based on the same transaction prong.

As noted, for permissive joinder, the "right to relief must "aris[e] out of the same transaction, occurrence, or series of transactions or occurrences." M.R. Civ. P. 20(a). Ace posits in its memo that "whether separate transactions or occurrences constitute a series is determined by examining whether there is some systemic pattern or logical relation between the tortious events." (M. Sever 3 (quoting Gruening v. Sucic, 89 F.R.D. 573, 574 (E.D. Penn. 1981).) Ace argues the complaint alleges distinct torts committed by different defendants at different times. The test, however, is not based on the nature of the cause of action; the test is whether the right to relief arises out of the same series of transactions or occurrences. See Jonas v. Conrath, 149 F.R.D. 520, 523 (S.D. W. Va. 1993) (refusing to sever a malpractice claim against an optometrist from a breach of contract claim for non-coverage against the insurer when the incidents for each right to relief arose during the same time period); Pepper v. SRO Concerts, Inc., No. 90 Civ. 5902 (MBM), 1992 U.S. Dist. LEIXS 2204, at *3-*5 (E.D.N.Y. Feb. 24, 1992) (refusing to sever legal malpractice claims brought by plaintiff clients and the attorneys' counterclaims for unpaid fees from claims brought against various other defendants for breach of employment agreements which the attorneys had negotiated and drafted). But see Gruening, 89 F.R.D. at 573 (concluding that distinct torts committed at distinct times warranted severance of parties); Pena v. McArthur, 889 F. Supp. 403, 406 (E.D. Cal. 1994) (severing claims against an insurer for breach of fiduciary duty from claims against an uninsured motorist for personal injury based on the reasoning in Gruening).

In the present case, Plaintiffs allege that Preti and MCM were involved in advising Plaintiffs on how to raise capital in order to effectuate a buy-out with Ace, through corporate promissory notes and personal promissory notes. Plaintiffs allege that Ace knew about Plaintiffs' attempts to raise capital, and used those attempts while meeting with investors of Rent-A-Husband and relied on the proceeds for its own self-promotion. Plaintiffs further allege that the issues regarding the legality of the private offering, the withdrawal of Preti as Plaintiffs' counsel, the legality of the personal promissory notes, and the securities investigation all affected Ace's interest in obtaining an ownership stake in Rent-A-Husband.

The court is cognizant that the only facts upon which it can make its decision are those in the complaint, allegations that have been untested and unchallenged as of yet. The court also notes that the claims for breach of fiduciary duty and legal malpractice brought against Preti and MCM make no mention of Ace at all, focusing solely on the allegedly inadequate advice that was provided to Plaintiffs. Read alone, those counts have nothing in common with any of the claims brought against Ace. Plaintiffs make much of the overlap in time and the effect of the civil and criminal proceedings, but it is less than clear to the court those facts give rise to Plaintiffs' causes of action against Ace or that these tortious actions are even logically related. The legal proceedings could be considered just a circumstance that forms the basis of knowledge for Ace's actions, or it could be considered an essential part of the privacy torts and misrepresentation claims alleged against Ace.

Nevertheless, based on these allegations in the complaint, the court cannot say at this point in the proceedings that the events giving rise to Plaintiffs right to relief do not "aris[e] out of the same transaction, occurrence, or series of transactions or occurrences." M.R. Civ. P. 20(a).

The court must thus deny Ace's motion to sever without prejudice. The parties are encouraged to conduct discovery in a manner that will expediently and fully explore the connection between the actions of Preti, MCM, and Ace, as Ace has indicated its intent to move for severance again with a more fully developed evidentiary record.

Based on the foregoing, Ace's motion to sever is DENIED without prejudice. Pursuant to M.R. Civ. P. 79(b), the clerk is hereby directed to incorporate this Order and Judgment by incorporation in the docket.

Dated October 25, 2011

_________________

A. M. Horton

Justice, Business and Consumer Court

BUSINESS AND CONSUMER COURT

Kaile R. Warren, Jr. et al v. Preti, Flaherty, Beliveau & Pachios,

LLC et al

BCD-CV-2011-28

Counsel of Record

Attorney Name

Daniel Lilley, Esq.

Tina Nadeau, Esq.

John Aromando, Esq.

Mark Porada, Esq.

Peter DeTroy, Esq.

Russel Pierce, Esq.

Thimi Mina, Esq.

Samuel Moulthrop, Esq.

Party Name

Kaile Warren, Jr. et al (Plaintiffs)

Kaile Warren, Jr. et al (Plaintiffs)

Preti, Flaherty, Beliveau & Pachios

(Defendant)

Preti, Flaherty, Beliveau & Pachios

(Defendant)

Marcus, Clegg & Mistretta

(Defendant)

Marcus, Clegg & Mistretta

(Defendant)

Ace Hardware Corp (Defendant)

Ace Hardware Corp (Defendant)

Location: Portland

Docket No.: BCD-CV-11-28

KAILE R. WARREN, JR. et als. Plaintiffs

v.

PRETI, FLAHERTY, BELIVEAU & PACHIOS, LLC, et als. Defendants

ORDER ON DEFENDANTS' JOINT MOTION TO COMPEL AND

PLAINTIFFS' MOTION FOR PROTECTIVE ORDER

Defendants' Joint Motion to Compel Documents Reflecting Communications Between Attorney Lilley and Assistant Attorney General Colleran, and Plaintiffs' Motion for Protection are before the court. The court elects to decide both motions without oral argument, see M.R. Civ. P. 7(b)(7).

The subject matter of both motions is a series of communications between Plaintiffs' counsel and one or more attorneys in the Office of the Maine Attorney General in the context of now-concluded criminal and civil cases instituted by the State against Plaintiffs in the Cumberland County Unified Criminal Docket and the Cumberland County Superior Court. State v. Warren, Docket No. CUMCD-09-9716; State v. Rent-A-Husband et als., Docket No. CUMSC-CV-11-07.

The materials at issue are listed in a "privilege log" attached as Exhibit A to the Plaintiffs' Motion for Protection. In that log, the disputed materials are listed by Bates number, all with die prefix of KWC.¹³

13 The privilege log also includes documents withheld on the ground of attorney-client privilege—all assigned Bates numbers with a KWE prefix—that are not at issue and therefore are excluded from the scope of this Order.

The following points are clearly established:

• All of the materials are communications between Plaintiffs' counsel and the counsel for the State in the two cases¹⁴
• The State and the Plaintiffs were adverse parties (parties on opposite sides of the claims or charges at issue in the cases), as opposed to being co-parties with similar or identical interests
• All of the communications were prepared in anticipation of, or in the course of litigation or for trial, in the civil and criminal cases between the State and the Plaintiffs
• The sole ground asserted by Plaintiffs in their Motion for Protection for objecting to disclosure of the communications and related materials is the provision in Rule 26(b)(3) of the Maine Rules of Civil Procedure that affords protection against disclosure of an attorney's work product

14 The court agrees with the Defendants that Plaintiffs cannot assert an attorney work product objection as to work product of the State's counsel, so only the work product of Plaintiffs' own counsel is at issue.

14 The court agrees with the Defendants that Plaintiffs cannot assert an attorney work product objection as to work product of the State's counsel, so only the work product of Plaintiffs' own counsel is at issue.

Plaintiffs contend that because all of the materials at issue were prepared in anticipation of litigation or trial in one or both of the two prior cases within the meaning of Rule 26(b)(3), he Defendants are required to make a showing of "substantial need" for them, within the meaning of the rule. Plaintiffs contend Defendants have failed to make the required showing and that, in any case, the court should preclude discovery because the requested materials contain "mental impressions, conclusions, opinions or legal theories" of Plaintiffs' counsel and therefore constitute attorney work product.

Defendants counter hat the "substantial need" and work product provisions of Rule 26(b)(3) do not apply because all of the disputed materials were disclosed by Plaintiffs' counsel to counsel for an adverse party. They also contend that the attorney work product does not apply in any event because the disputed material was all prepared in connection with litigation other than the present case.

Neither side has identified any Law Court or other Maine court precedent directly on point, but both rely on federal court precedent addressing the counterpart federal rule, Fed. R. Civ. P. 26(b)(3). The Law Court as well has relied on federal authority as guidance in analyzing Rule 26(b)(3). See Boccaleri v. Maine Medical Center, 534 A.2d 671, 672-73 (Me. 1987). This court likewise looks to federal authority for guidance.

"The work-product doctrine, codified for the federal courts in Fed. R. Civ. P. 26(b)(3), is intended to preserve a zone of privacy in which a lawyer can prepare and develop legal theories and strategy "with an eye toward litigation," free from unnecessary intrusion by his adversaries. Analysis of one's case "in anticipation of litigation" is a classic example of work product and receives heightened protection under Fed. R. Civ. P. 26(b)(3).
United States v. Adlman, 134 F.3d 1194, 1196 (2d Cir. 1998), quoting NLRB v. Sears, Roebuck & Co., 421 U.S. 132, 154(1975); Hickman v. Taylor, 329 U.S. 495, 510-11 (1947).

However, as the United States Supreme Court has held, "[t]he privilege derived from the work-product doctrine is not absolute. Like other qualified privileges, it may be waived." United States v. Nobles, 422 U.S. 225, 239 (1975).

Based on logic as well as the clear weight of authority, this court concludes that when an attorney voluntarily communicates the attorney's "mental impressions, conclusions, opinions or legal theories" to opposing counsel in litigation, that disclosure operates to waive whatever Rule 26(b)(3) protection might otherwise attach to that communication. See. e.g., United States v. Massachusetts Institute of Teclmology, 129 F.3d 681, 687 (1" Cir. 1997), citing Westinghouse Elec. Corp. v. Republic of the Philippines, 951 F.2d 1414, 1428-29 (3d Cir.1991); In re Steinhardt Partners, L.P., 9 F.3d 230, 235 (2d Cir. 1993); In re Subpoenas Duces Tecum, 738 F.2d 1367, 1371-75 (D.C.Cir.1984); In re Martin Marietta Corp., 856 F.2d 619, 625 (4th Cir.1988), cert. denied, 490 U.S. 1011 (1989); In re Chrysler Motors Corp. Overnight Evaluation Program Litig, 860 F.2d 844, 846-47 (8th Cir. 1988). See also 8 C. Wright, A. Miller & R. Marcus, FEDERAL PRACTICE AND PROCEDURE § 2024, at 368-69 (1994) (citing cases).

"Disclosure to an adversary waives the work product protection as to items actually disclosed, even where disclosure occurs in settlement." Grumman Aerospace Corp. v. Titanium Metals Corp. of America, 91 F.R.D. 84, 90 (E.D.N.Y.1981); see also Chubb Integrated Systems Ltd. v. National Bank, 103 F.R.D. 52, 67 (D.D.C.1984).

Here, all of the materials at issue either were, or were included in, communications between Plaintiffs' counsel and opposing counsel in two cases in the State and the Plaintiffs were plainly adverse. The court concludes that such disclosure operates to waive any basis for objection to discovery under the Rule 26(b)(3) "substantial need" and attorney work product provisions and in fact removes the materials in question from within the ambit of Rule 26(b)(3).

This conclusion makes it unnecessary, at least in this Order, to address the Defendants' alternate argument that Rule 26(b)(3) does not protect the materials at issue because they were generated in anticipation of, or during, different litigation. See, e.g. Hunnewell, Inc. v. Piper Aircraft Corp., 50 F.R.D. 117, 119 (M.D. Pa. 1970); Hanover Shoe, Inc. v. United Shoe Machinery Corp., 207 F. Supp. 407, 410 (M.D. Pa. 1962). The Plaintiffs have a reasonable argument that the connection between the State's claims and charges in the prior civil and criminal cases on the one hand and their claims in this case on the other hand is sufficient to extend the protection of Rule 26(b) (3) to their counsels' work product as to which that protection has not been waived, even though the prior litigation is concluded. See Federal Trade Commission v. Grolier, Inc., 462 U.S. 19, 28 (1983) (in Freedom of Information Act appeal, "attorney work product is exempt from mandatory disclosure without regard to the status of the litigation for which it was prepared"). See also Philadelphia Elec. Co. v. Anaconda American Brass Co., 275 F. Supp. 146, 148 (E.D. Pa. 1967), citing Republic Gear Company v. Borg-Warner Co., 381 F.2d 551 (2d Cir. 1967). However, the court need not and does not decide the broader question of how Rule 26(b)(3) applies to Plaintiffs' counsels' work product materials beyond those that have been communicated to opposing counsel in the prior cases.

The 6-page privilege log filed as Exhibit A on its face indicates that all of the documents at issue—assigned Bates numbers with a KWC prefix—were communications between Plaintiffs' counsel and one or more representatives of the Office of the Attorney General and, in some cases, others. On their face therefore, all of the disputed materials are outside the protection of Rule 26(b)(3) based on waiver by means of voluntary disclosure to opposing counsel. It is thus unnecessary for the court to conduct any in camera review of the enumerated materials.

IT IS ORDERED AS FOLLOWS:

(1) Defendants Joint Motion to Compel is hereby granted. Plaintiffs' Motion for Protection is hereby denied. All documents listed with a KWC Bates number prefix in die privilege log attached to Plaintiffs' motion as Exhibit A shall be disclosed by Plaintiffs' counsel forthwith to the Defendants' counsel within 10 days of this Order.

Pursuant to M.R. Civ. P. 79(b), the clerk is hereby directed to incorporate this Order by reference in the docket.

_________________

A. M. Horton

Justice, Business and Consumer Court

BUSINESS AND CONSUMER COURT

Kaile R. Warren, Jr. et al v. Preti, Flaherty, Beliveau & Pachios,

LLC et al

BCD-CV-2011-28

Counsel of Record

Attorney Name

Daniel Lilley, Esq.

Tina Nadeau, Esq.

John Aromando, Esq.

Mark Porada, Esq.

Peter DeTroy, Esq.

Russel Pierce, Esq.

Thimi Mina, Esq.

Samuel Moulthrop, Esq.

Party Name

Kaile Warren, Jr. et al (Plaintiffs)

Kaile Warren, Jr. et al (Plaintiffs)

Preti, Flaherty, Beliveau & Pachios

(Defendant)

Preti, Flaherty, Beliveau & Pachios

(Defendant)

Marcus, Clegg & Mistretta

(Defendant)

Marcus, Clegg & Mistretta

(Defendant)

Ace Hardware Corp (Defendant)

Ace Hardware Corp (Defendant)

Location: Portland

Docket No.: BCD-CV-11-28

KAILE R. WARREN, JR., RENT-A-HUSBAND LLC, RENT-A-HUSBAND ENTERPRISES,

LLC, and KW ENTERPRISES, INC., Plaintiffs,

v.

PRETI, FLAHERTY, BELIVEAU & PACHIOS, LLC, MARCUS, CLEGG & MISTRETTA, P.A.,

and ACE HARDWARE CORPORATION, Defendants

ORDER ON ACE HARDWARE CORPORATION'S

SPECIAL MOTION TO DISMISS

Ace Hardware Corporation (Ace) moves to dismiss Plaintiffs' claims for defamation (Count V) and false light (Count VI) pursuant to Maine's anti-SLAPP statute, 14 M.R.S. § 556 (2011). Plaintiffs oppose the motion on two grounds: first, the statements of ACE on which those claims are not protected under the anti-SLAPP statute; and second, Ace's statements had no "reasonable factual support or any arguable basis in law." 14 M.R.S. § 556. By agreement of the parties, the court did not hold oral argument on Ace's motion.

FACTUAL BACKGROUND

Viewed in the light most favorable to Ace as the moving party, the pleadings and affidavits reveal the following facts. See Morse Bros., Inc. v. Webster, 2001 ME 70, ¶ 18, 772 A.2d 842. In 2009, in response to media inquiries regarding Rent-A-Husband, Ace issued a media statement regarding its relationship with Plaintiffs.¹⁵ (Boniface Aff. ¶ 3.) The media statement provided:

15 It is not clear when Ace issued the media statement, but the court presumes it occurred at or near the time of the criminal and civil investigations of Plaintif FKaile R. Warren.

A handful of independently owned and operated Ace stores have or have had relationships with Rent-A-Husband, which is just one of a number of do-it-for-me service providers with whom select Ace stores across the country have partnered.
For six months in 2003, the Ace Hardware Corporation worked with Rent-A-Husband for it to provide certain services to customers of several Ace stores located in Maine and New Hampshire. Over the next several years, Ace had a series of informal discussions with Mr. Warren regarding a potential ownership stake in Rent-A-Husband, but no formal agreement or agreement in principle was ever reached. In early 2008, Ace discontinued these and other conversations with Mr. Warren for a number of business reasons.
Ace has no knowledge of Mr. Warren's conversations with his investors or lenders.

(Boniface Aff. Exh. 1.) On October 21, 2009, September 10, 2009, and September 4, 2009, three separate articles were published by three separate publications regarding Plaintiffs' business relationships with Ace. (Boniface Aff. ¶ ¶ 4-6; see Boniface Aff. Exhs. 2-4.)

On or about November 2, 2009, the Maine State Office of Securities served a subpoena for documents on Ace, commanding production of documents in Ace's possession pertaining to Ace's business relationship or prospective business relationship with Plaintiffs. (Bohl Aff. ¶ 3; see Bohl Aff. Exh. A at 3.) Ace produced the documents on November 19, 2009, and December 15, 2009. (Bohl Aff. ¶ 3.)

In December of 2009, Ace was advised that Plaintiff Warren had been indicted for criminal offenses by a grand jury in Maine in the matter of State v. Kaile R. Warren, Jr., docket number CUM-CR-09-9716. (Bohl Aff. ¶ 4.) Following return of the indictment, the Office of Securities sought the testimony of five Ace employees: John Venhuizen, David Sonnen, Mark Riebe, Jay Huebner, and Dale Fennel. (Bohl Aff. ¶ 5.) The unsworn interviews were conducted via telephone on January 14, 2010, January 19, 2010, and January 22, 2010. (Bohl Aff. ¶ 5.) Four of these employees were designated as trial witnesses for the criminal case. (Bohl Aff. ¶ 6.) All contact between Ace and the Office of Securities was initiated by the state agency. (Bohl Aff. ¶ ¶ 7-8.)

While the criminal matter was still pending the State of Maine filed a civil enforcement action against the Plaintiffs alleging securities violations. (Compl. ¶ 52.)On February 23, 2011, a consent judgment was entered into with the Plaintiffs, pursuant to which the criminal prosecution was dismissed with prejudice and Plaintiffs agreed to pay restitution to the State of Maine for the Rent-A-Husband investments of $1,994,657.08 plus interest. (Compl. ¶ ¶ 54-55.)

Plaintiffs initiated this litigation in Cumberland County Superior Court on March 22, 2011, which included claims against Ace for defamation (Count V) and false light (Count VI) based on the foregoing statements to the media and the Office of Securities. Pursuant to this court's Order on Motion to Modify of Ace Hardware, dated November 29, 2011, the court allowed Ace to file a special motion to dismiss pursuant to 14 M.R.S. § 556.

DISCUSSION

Maine's anti-SLAPP statute (Strategic Lawsuit Against Public Participation), 14 M.R.S. § 556, "is designed to guard against meritless lawsuits brought with the intention of chilling or deterring the free exercise of the defendant's First Amendment right to petition the government by threatening would-be activists with litigation." Schelling v. Lindell, 2008 ME 59, ¶ 6, 942 A.2d 1226. The statute provides for a special motion to dismiss when a claim asserted against the moving party is "based on the moving party's exercise of the moving party's right to petition under the Constitution of the United States or the Constitution of Maine."¹⁶ 14 M.R.S. § 556.

16 The First Amendment to the United States Constitution provides, in relevant part: "Congress shall make no law . . . abridging . . . the right of the people to peaceably assemble, and to petition the government for a redress of grievances." Article I, section 15 of the Maine Constitution provides: "The people have a right at all times in an orderly and peaceable manner to assemble to consult upon the common good, to give instructions to their representatives, and to request, of either department of the government by petition or remonstrance, redress of their wrongs and grievances."

The defendant carries the initial burden of showing that the claims to which the anti-SLAPP motion is directed are based upon "petitioning activities alone and have no substantial basis other than or in addition to the petitioning activities."¹⁷ Duracraft Corp. v. Holmes Prods. Corp., 691 N.E.2d 935, 943 (Mass. 1998). The "focus solely is on the conduct complained of, and, if the only conduct complained of is petitioning activity, then there can be no other substantial basis for the claim." The Cadle Co. v. Schlichtmann, 859 N.E.2d 858, 864 (Mass. 2007) (quotation marks omitted). If the moving party meets this burden, then "the party against whom the special motion is made" must show "that the moving party's exercise of its right of petition was devoid of any reasonable factual support or any arguable basis in law" and resulted in "actual injury" to the non-moving party. 14 M.R.S. § 556; accord Schelling, 2008 ME 59, ¶ 7, 942 A.2d 1226.

17 As the parties point out, Massachusetts's anti-SLAPP statute is nearly identical to Maine's, and the Law Court has relied upon Massachusetts cases in interpreting Maine's statute. See Morse Bros., Inc. v. Webster, 2001 ME 70, ¶¶ 15, 17-20, 772 A.2d 842; cf. Copp v. Liberty, Mem-10-2 (Feb. 2, 2010).

The court must first determine whether the Plaintiffs' claims at issue have as their only substantial basis petitioning activity by Ace that is protected by the statute.¹⁸ Section 556 defines the exercise of the right to petition as follows:

18 Because none of the parties has argued that the Attorney General's Office and the Office of Securities are not executive bodies, the court will assume that both are executive bodies for purposes of the anti-SLAPP statute.

any written or oral statement made before or submitted to a legislative, executive or judicial body, or any other governmental proceeding; any written or oral statement made in connection with an issue under consideration or review by a legislative, executive or judicial body, or any other governmental
proceeding; any statement reasonably likely to encourage consideration or review of an issue by a legislative, executive or judicial body, or any other governmental proceeding; any statement reasonably likely to enlist public participation in an effort to effect such consideration; or any other statement falling within constitutional protection of the right to petition government.

14 M.R.S. § 556; accord, Schelling, 2008 ME 59, ¶ 11, 942 A.2d 1226 (characterizing the "right to petition" as defined "very broadly" under the anti-SLAPP statute).¹⁹

19 The Massachusetts Supreme Judicial Court has stated that the right to petition may include: "reporting violations of law, writing to government officials, attending public hearings, testifying before government bodies, circulating petitions for signature, lobbying for legislation, campaigning in initiative or referendum elections, filing agency protests or appeals, being parties in law-reform lawsuits, and engaging in peaceful boycotts and demonstrations." Duracraft Corp. v. Holmes Prods. Corp., 691 N.E.2d 935, 940 (Mass. 1998) (quotation marks omitted).

In subsequent cases, the "right to petition" protected by the statute has included administrative appeals by abutting landowners from decisions of planning boards and a state environmental agency, see Morse Bros, Inc., 2001 ME 70, ¶ ¶ 3-6, 19, 772 A.2d 842, statements made by a citizen and his attorney to the press regarding a contractual dispute on a public construction project, see Maietta Constr., Inc. v. Wainwright, 2004 ME 53, ¶ ¶2-4, 847 A.2d 1169, and a letter to the editor of a state legislator regarding a bill recently considered by the Maine Legislature, see Schelling, 2008 ME 59, ¶ ¶ 13-14, 942 A.2d 1226.

Ace asserts that because all the statements made in the interviews were part of ongoing investigations, those statements fall within "any written or oral statement made before or submitted to a legislative, executive or judicial body, or any other governmental proceeding." 14 M.R.S. § 556. Ace also asserts that the media statement falls within "any written or oral statement made in connection with an issue under consideration or review by a legislative, executive or judicial body" because the statement was "reasonably likely to enlist public participation" and garner support for Ace's position. Id.; see also Maietta Constr., Inc., 2004 ME 53, ¶ 23, 847 A.2d 1169 (Calkins, J., dissenting).

Plaintiffs counter that Ace was not engaged in petitioning activity at all because Ace was not seeking redress for grievances of its own. Plaintiffs characterize Ace's interview statements as those of witnesses responding to questions, not activists initiating a discussion, and Ace's media statement as being aimed at dissociating Ace from the Plaintiffs. Plaintiffs suggest that at no time was Ace "petitioning" a governmental body to take action. Plaintiffs rely upon a series of Massachusetts Supreme Judicial Court cases in which the Massachusetts high court has limited the scope of the Massachusetts anti-SLAPP statute.

In Kobrin v. Gastfriend, 821 N.E.2d 60 (Mass. 2005), the court held that an expert witness hired by an administrative board to provide an expert report and testimony could not claim the protection of the anti-SLAPP statute for statements made before the board because he was not exercising his own right to petition or seek redress from the administrative board. Id. at 64-65. Relying on the language of the statute, the court explained that "[T]he statute explicitly extends protection to a party based on 'said party's exercise of its right of petition,'" see id. at 64 (quoting MASS. ANN. LAWS ch. 231, § 59H (LEXIS through 2011 Legis. Sess.)) (emphasis in case); accord 14 M.R.S. § 556 ("moving party's exercise of the moving party's right to petition"; "a party's exercise of its right of petition" (emphasis added)), and the right of petition protected is that guaranteed by the federal and state constitutions, see 821 N.E.2d at 65.²⁰ The expert "was not exercising his right to petition or seek any redress from the board (a government body), but rather was acting solely on behalf of the board as an expert investigator and witness." Kobrin, 821 N.E.2d at 65. Thus, the court held that the anti-SLAPP statute did not apply to the expert because he was not petitioning on his own behalf. Id. at 69.

20 The Massachusetts Constitution provides, in relevant part:

The people have a right, in an orderly and peaceable manner, to assemble to consult upon the common good; give instructions to their representatives, and to request of the legislative body, by the way of addresses, petitions, or remonstrances, redress of the wrongs done them, and of the grievances they suffer.

Mass. Const, pt. 1, art. XIX.

Likewise, in Fustolo v. Hollander, 920 N.E.2d 837 (Mass. 2010), a reporter wrote a series of articles for a neighborhood paper in which she was critical of a developer's proposed projects. Id. at 839. The reporter was also a resident of the neighborhood in question and an active member of a community organization similarly critical of neighborhood development projects, but she did not disclose her membership in the organization in her articles and always wrote in an objective manner. Id. at 839, 842. When the developer sued for defamation, the reporter filed an anti-SLAPP motion, arguing that the articles "gave expression to her personal interests as a member of the community keenly interested in its development and protection" and that the reporting "played an essential role in facilitating the petitioning activity of [the community organization] and other members of the community." Id. at 840. The Massachusetts Supreme Judicial Court held, consistent with Kobrin, that the reporter's articles were not petitioning activity because they "did not contain statements seeking to redress a grievance or to petition for relief of her own." Id. at 842.

Finally, in The Cadle Co. v. Schlichtmann, 859 N.E.2d 858 (Mass. 2007), the court addressed a website published by an attorney regarding the practices of a debt collection company; the attorney was also suing that company on behalf of four clients. Id. at 860-61. When the debt collection company sued for defamation and other various claims, the attorney responded with an anti-SLAPP motion that asserted the lawsuit was filed in retaliation for the attorney's petitioning activities. Id. at 862. On appeal, the court held that the website was not petitioning activities by an injured member of the public, but was, at least in part, commercial activity "as an attorney advertising his legal services" and attempting "to attract clients to his law practice." Id. at 864-65. Although the debt collection company's practices had generated public and governmental interest, the court also noted: "[t]hat a statement concerns a topic that has attracted governmental attention, in itself, does not give that statement the [petitioning] character contemplated by the [anti-SLAPP] statute." Id. at 866-67 (quoting Global NAPs, Inc. v. Verizon New Eng., Inc., 828 N.E.2d 529, 533 (Mass. App. Ct. 2005)) (third alteration added). Because the court concluded that the website did not constitute petitioning activities, the trial court's denial of the anti-SLAPP motions were affirmed. Id. at 867; see also id. at 864 ("if the only conduct complained of is petitioning activity, then there can be no other substantial basis for the claim" (quotation marks omitted)).

The Law Court has not addressed the scope of petitioning activities under Maine's anti-SLAPP statute in the same depth as have the Massachusetts courts. But see Schelling, 2008 ME 59, ¶ 11, 942 A.2d 1226 (indicating the right to petition protected by the anti-SLAPP statutes is very broad). Nevertheless, in light of the substantial similarity between the Maine and Massachusetts Constitutions and the Maine a Massachusetts anti-SLAPP statutes and, the court finds the reasoning of the Massachusetts cases persuasive.

First, the rights protected by the Massachusetts and Maine anti-SLAPP statutes are the same: the exercise of the rights of petition under the federal and state constitutions. See 14 M.R.S. § 556 (protecting the exercise of the "right of petition under the Constitution of the United States or the Constitution of Maine"); cf. MASS. ANN. LAWS ch. 231, § 59H (protecting the exercise of the "right of petition under the constitution of the United States or of the commonwealth"). Second, the Maine and Massachusetts Constitutions' respective guarantees of the right to petition contain nearly identical language. Compare Me. Const, art. I, § 15, with Mass. Const, pt. 1, art. XIX. Finally, both anti-SLAPP statutes expressly state that the right of petition protected is the constitutional right to petition of the party attempting to secure protection of the anti-SLAPP statue. See 14 M.R.S. § 556 ("moving party's exercise of the moving party's right to petition"; "a party's exercise of its right of petition" (emphasis added)); MASS. ANN. LAWS ch. 231, § 59H ("said party are based on said party's exercise of its right of petition"; "a party's exercise of its right of petition" (emphasis added)).

Based on these similarities, the court concludes that the Law Court would limit the protection afforded by the Maine anti-SLAPP statute to statements or activities made in the moving party's exercise of its own right to petition. See Fustolo, 920 N.E.2d at 842; Kobrin, 821 N.E.2d at 65.

Plaintiffs allege that the media statement and the interviews were defamatory in nature and argue that Ace is not protected by section 566 because Ace was not seeking a redress of grievances or petitioning on its own behalf by issuing a media statement and cooperating with the Office of Securities' and Attorney General's respective investigations into Plaintiffs.²¹ See Fustolo, 920 N.E.2d at 842; Kobrin, 821 N.E.2d at 69.

21 Ace attempts to distinguish Kobrin on the ground that the expert was a government contractor, but the decision in Fustolo makes clear that the essential holding of Kobrin is not about the expert's status as a government contractor but his failure to engage in any activity seeking a redress of his own grievances to a government body.

Ace asserts that its motive for what it claims to be petitioning activity is irrelevant. Motivation for petitioning activity is indeed irrelevant in an anti-SLAPP analysis, see Office One, Inc. v. Lopez, 769 N.E.2d 749, 757 (Mass. 2002), but Ace must still establish that it was in fact exercising its own right of petition by engaging in petitioning activity, see 14 M.R.S. § 556. Nothing in the record suggests that Ace's purpose in issuing the media statement was to influence any governmental body, enlist public participation, or "expand public consideration" on any matter relating to the media statement. See id. ¶ 13, 942 A.2d 1226.

Still, Ace's media statement arguably can be analogized to the letter to the editor in Schelling. Were the media statement "the only conduct complained of by Plaintiffs, see The Cadle Co., 859 N.E.2d at 864, the Schelling decision could support granting Ace's special motion to dismiss.²² Plaintiffs' claims, however, not only assert defamation in the media statement, but also assert that Ace employees provided defamatory information in the course of the interviews with the Maine Office of Securities.

22 That Schelling would compel a ruling for Ace were the Plaintiffs' claims for defamation and false light limited to the media statement is not clear. The Schelling case reflects a very broad application—perhaps defining the outer limits—of the anti-SLAPP statute.

The record does not support Ace's argument that its interview responses reflected "petitioning" activity on its own behalf. Ace has not identified any grievance it had for which it was seeking redress, any interest of its own it was pursuing in the course of responding to questions in the interviews, or any issue under consideration it was attempting to influence or upon which it was attempting to enlist public participation to effect such consideration. It is undisputed that Ace did not initiate communications with the Office of Securities and that the Office of Securities initiated all communication with Ace. Moreover, Ace did not bring the alleged security violations to the attention of the Office of Securities; had it done so, this analysis might have had a different outcome. Ace was simply responding to inquiries in the context of a government investigation of third parties.²³

23 Pertinent anti-SLAPP cases indicate that protected petitioning activity can include reports made to a law enforcement agency when the moving party initiated the report. See Benoit v. Frederickson, 908 N.E.2d 714, 719 (Mass. 2009) (concluding a teenager's report of rape to the police was petitioning activity protected by the anti-SLAPP statute); McLarnon v. Jokisch, 727 N.E.2d 813, 816-18 (Mass. 2000) (holding that the protection of the anti-SLAPP statute "is broad enough to include filing for abuse protection orders and supporting affidavits").

The court has not located any authority, at least in Maine, for the proposition that statements responding to information requests, as opposed to statements initiating a discussion or a complaint, in the course of a civil or criminal prosecution of a third party from a law enforcement agency or an executive, legislative, or judicial body are protected under the anti-SLAPP statute.²⁴ This is not to say that the protection of the anti-SLAPP statute can never extend to statements made in response to a government inquiry, but only to say that statements initiating by the moving party can more clearly be considered petitioning activity.

24 The court distinguishes between Ace's voluntary responses to activity at issue here and sworn testimony before an executive, legislative, or judicial body, which can be compelled by the governmental body.
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CONCLUSION

In Kobrin, the Massachusetts high court said that in analyzing the merits of an anti-SLAPP motion to dismiss, "our only concern, as required by the statute, is that the person be truly 'petitioning' the government in the constitutional sense." 861 N.E.2d at 68 n.14. Ace has not established that the conduct on which Plaintiffs' claims for defamation (Count V) and false light (Count VI) are based consisted of Ace's own protected petitioning activity. Ace therefore has not made the initial showing required before the burden is shifted to the Plaintiffs, and it is unnecessary to proceed to that step of the analysis. See 14 M.R.S. § 556; Duracraft Corp., 691 N.E.2d at 943.

On the other hand, the court is satisfied that Ace had ample basis for the motion—based on the Ace media statement, which is one of the bases for Plaintiffs' claims, arguably being protected—and therefore that the Plaintiffs' request for sanctions under M.R. Civ. P. 11 is uncalled for, and it is denied.

Based on the foregoing, Defendant Ace Hardware Corporation's special motion to dismiss is DENIED. Pursuant to M.R. Civ. P. 79, the clerk shall incorporate this order into the docket by reference.

_________________

A. M. Horton

Justice, Business and Consumer Court

BUSINESS AND CONSUMER COURT

Kaile R. Warren, Jr. et al v. Preti, Flaherty, Beliveau & Pachios,

LLC et al

BCD-CV-2011-28

Counsel of Record

Attorney Name

Daniel Lilley, Esq.

Tina Nadeau, Esq.

John Aromando, Esq.

Mark Porada, Esq.

Peter DeTroy, Esq.

Russel Pierce, Esq.

Thimi Mina, Esq.

Samuel Moulthrop, Esq.

Party Name

Kaile Warren, Jr. et al (Plaintiffs)

Kaile Warren, Jr. et al (Plaintiffs)

Preti, Flaherty, Beliveau & Pachios

(Defendant)

Preti, Flaherty, Beliveau & Pachios

(Defendant)

Marcus, Clegg & Mistretta

(Defendant)

Marcus, Clegg & Mistretta

(Defendant)

Ace Hardware Corp (Defendant)

Ace Hardware Corp (Defendant)