Brinkley v. Matteucci, 1st Cir. (1995)
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Transcript of Brinkley v. Matteucci, 1st Cir. (1995)
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USCA1 Opinion
June 28, 1995 [NOT FOR PUBLICATION]
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
____________________
No. 94-2284
BRINKLEY & CO., INC.,
Plaintiff, Appellant,
v.
VINCENT T. MATTEUCCI, ET AL.,
Defendants, Appellees.
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____________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Edward F. Harrington, U.S. District Judge] ___________________
____________________
Selya, Cyr and Stahl,
Circuit Judges. ______________
____________________
Valeriano Diviacchi, with whom Diviacchi Law Office was o___________________ _____________________
for appellant.
Harvey Weiner, with whom Michael P. Duffy and Peabody &______________ _________________ ________
were on brief for appellees Barber, Looney, Grahn, Synder,
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Pisegna, Kelly, Farrell and Grossman.
Maria R. Durant, with whom Michael A. Collora and Dwyer &_______________ __________________ _______
were on brief for appellee Matteucci.
____________________
____________________
Per Curiam. Plaintiff Brinkley & Co., Inc. ("Brin
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Per Curiam. __________
Co.") appeals from a district court judgment summarily dismis
its complaint against Vincent Matteucci ("Matteucci"), former
of Athena Management Co., Inc. ("Athena"), and various member
the law firm of Looney & Grossman. As summary judgment
proper, we affirm.
I I
BACKGROUND1 BACKGROUND __________
Athena was incorporated on August 28, 1984, for
purpose of providing investment management services. Matte
served as its first president. Peter Brinkley, Brinkley C
principal shareholder, was hired by Athena in April 1987
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eventually became president and CEO, although he was neve
shareholder.
Athena lacked financial strength from its incept
By June 30, 1987, it had accumulated a $648,848 deficit an
negative net worth. In September of 1988, Brinkley Co. exte
Athena an unsecured loan and obtained a $100,000 demand not
return. At the end of the following fiscal year, Athena's
worth was minus $799,588 and its financial position continue
erode throughout the following year as well.
By September of 1989, Athena had lost seven of its
clients. Hanson Industries ("Hanson") and Nazareth Family Ce
____________________
1We relate the evidence in the light most favorable
Brinkley Co., the party resisting summary judgment. Simon____
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FDIC, 48 F.3d 53, 56 (1st Cir. 1995).____
2
("Nazareth") were its only remaining clients. On October
1989, Peter Brinkley resigned and Matteucci resumed the rol
president. On October 12, Brinkley Co. demanded payment on
$100,000 note. As payment was not forthcoming, Brinkley
brought the instant action against Athena in the United St
District Court for the District of Massachusetts. Sho
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thereafter, Peter Brinkley resigned as a director of Athena.
On December 9, 1989, one Frank Griswold, a busi
acquaintance of Matteucci, executed Articles of Incorpora
establishing Charles River Management Company, Inc. ("Cha
River"), a new investment management services company. At
time, Griswold and Matteucci understood that Matteucci woul
be listed as a Charles River stockholder or incorporator,
that he would become its majority shareholder on May 1, 1990.
In November of 1989, Looney & Grossman under
Athena's representation in the Brinkley Co. action.3
extensive consultation, Matteucci instructed Looney & Gros
not to defend the Brinkley Co. action against Athena on___
$100,000 demand note. As a result, in due course default j
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____________________
2Matteucci's brief incorrectly asserts that there i
evidence that he planned to join Charles River. See Matte ___
Brief at n.13. In a letter dated May 30, 1991, Matteucci
formed Nazareth that "[d]ue to a prearranged agreement in p
with Frank [Griswold] at the time of incorporation, I became
majority shareholder of Charles River Management on May 1, 19
3Brinkley Co. contends that Looney & Grossman became
volved during the fall of 1988. But though the record refl
that Looney & Grossman billed Matteucci personally for l
services during that time period, Brinkley Co. points to
evidence that this representation had anything to do with At
3
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ment was entered against Athena.
On November 15, 1989, Matteucci presented two alte
tive proposals to Athena's board of directors. Under the f
proposal, Athena would be dissolved; the second called for
complete recapitalization. Neither proposal was adopted
Athena's financial position continued to worsen, so that
November 30, 1989, it had a $969,176 negative net worth. By
end of calendar year 1989, it had lost an additional $142,036
On December 12, Athena was informed that Hanson, by
the larger of Athena's two remaining clients, would reduce
fee payments to Athena by 60% as of January 1, 1990, and that
additional funds would be invested in Hanson's short-term pen
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fund account with Athena. These actions by Hanson would re
Athena's projected gross income for the ensuing year by thi
seven percent.
Matteucci promptly called a stockholders' meeting
January 3, 1990, to consider Athena's dissolution. The no
discussed Athena's unmanageable debt and concluded as follows
even if all the liabilities were forgiven, it
would still be impossible to continue since
Hanson Industries (our only major account),
which has been extremely generous to Athena,
has reduced our fees by 60% on the larger of
the two accounts that we manage for it. As a
result, we are unable, even on a minimum
basis, to meet the obligations of rent, tele-
phone, and salaries which are necessary to
keep Athena's doors open.
With seven-eighths of Athena's outstanding s
represented, shareholders unanimously voted to liquidate.
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learning of the liquidation, the two remaining Athena client
4
Hanson and Nazareth immediately terminated their invest
contracts. Matteucci arranged a sale of Athena's fixture
Charles River, and resigned from all offices with Athena.
On February 1, 1990, as previously arranged, Matte
joined Charles River. Shortly thereafter, and on their
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N.E. 828, 833 (Mass. 1934) ("a cause of action which is
assignable cannot be reached and applied under [Mass. Gen. L.
214, 3(7)]"). There is no clear statement of Massachusetts
on whether such a cause of action may be reached and applied,
____________________
4We review the summary judgment ruling de novo to deter __ ____
whether the "'pleadings, depositions, answers to interrogator
and admissions on file, together with the affidavits, if
show that there is no genuine issue as to any material fact
that the moving party is entitled to judgment as a matte
law.'" Simon, 48 F.3d at 56 (citations omitted). The par _____
agree that the substantive law of Massachusetts governs
claims.
5
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the decisions in other jurisdictions are mixed. The majo
view is that a legal malpractice claim cannot be assigned.
Continental Cas. Co. v. Pullman, Comley, Bradley & Reeves, 70____________________ _________________________________
Supp. 44, 50 n.7 (D. Conn. 1989) (collecting cases), aff'd,_____
F.2d 103 (2d Cir. 1991). We bypass this unsettled questio
Massachusetts law, because, as the district court corre
noted, Athena would have had no viable malpractice claim aga
the Looney & Grossman defendants in any event.
Brinkley Co. asserts that Athena had three bases
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asserting a malpractice claim. First, the Looney & Gros
defendants failed to contest the action Brinkley Co. bro
against Athena. Second, during 1990 certain Looney & Gros
defendants allegedly engaged in dual representation of Cha
River and Athena. Third, the Looney & Grossman defen
allegedly failed to provide Athena's creditors with the requ
bulk transfer notice under Mass. Gen. L. ch. 106, 6-102
connection with the sale of Athena's tangible assets. We bri
address each contention in turn.
First, it is undisputed that Looney & Grossman
instructed by Athena not to answer the Brinkley Co. compla __________ __ ______ ___
See Fleet Nat'l Bank v. Anchor Media Television, Inc., 45___ ________________ ______________________________
546, 558 (1st Cir. 1995) (party may not resort to intenti
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self-contradiction to obtain unfair advantage). Second, ther
no record evidence whatsoever that any Looney & Grossman de
dant simultaneously represented Athena and Charles River. T
the Massachusetts bulk transfer law expressly applies onl
6
"those whose principal business is the sale of merchandise
stock." Mass. Gen. L. ch. 106, 6-102(3). Athena sol
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merchandise from stock, hence was not subject to the bulk tr
fer notice requirement.5
Summary judgment on Brinkley Co.'s civil conspi
claim was appropriate as well. It is essential to a c
conspiracy claim under Massachusetts law that the alleged
spirators have intended harm to the plaintiff. Robitaille_________
Morse, 186 N.E. 78, 80 (Mass. 1933). Brinkley Co. proffere_____
such evidence.
B. Matteucci B. Matteucci _________
Brinkley Co. alleges a breach of the fiduciary
Matteucci owed as an officer of Athena. The district court r
that Matteucci owed no fiduciary duty, since the corporate e
tence of Athena had been terminated before Matteucci first
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cussed with Griswold his plans to move over to Charles River
Athena's last two clients, Hanson and Nazareth.6
____________________
5Since the chapter 93A claim brought by Brinkley Co.,
Mass. Gen. L. ch. 93A, 2 (unfair business practices), is b
on the same allegations as the Brinkley Co. malpractice clai
too fails.
6The corporate opportunity doctrine, on which the dist
court rested its ruling, allows a fiduciary to take advanta
a business opportunity of which the principal cannot a
itself. However, "the corporate opportunity doctrine is a
of disclosure," Wartski v. Bedford, 926 F.2d 11, 19 (1st_______ _______
1991) (quoting In re Tufts Elecs., Inc., 746 F.2d 915, 917_________________________
Cir. 1984)), which requires "a full and honest disclosure of
relevant circumstances to permit a disinterested decision
to exercise its informed judgment." Id. (quoting Dynan v. Fr __ _____ _
508 N.E.2d 1371, 1378 (Mass. 1987)). There is strong re
evidence that Matteucci failed to comply with this duty. Co
quently, we do not rely on the corporate opportunity doctr
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7
Brinkley Co. contends on appeal that the district c
disregarded evidence that Matteucci breached his fiduciary
to Athena by arranging for the incorporation of Charles
prior to the dissolution vote on Athena. It points to an aff _____
vit by an Athena shareholder, stating that he would have opp
dissolution had he known of Matteucci's plans.
A corporate officer owes a fiduciary duty, Warts
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_____
Bedford, 926 F.2d 11, 13 (1st Cir. 1991) (applying Massachus _______
law), to accord "the utmost good faith and loyalty" to
corporation. Meehan v. Shaughnessy, 535 N.E.2d 1255, 1263 ( ______ ___________
1989) (citations omitted). Yet this fiduciary duty is
breached simply by "secretly setting up a new firm during
fiduciary's] tenure . . . 'provided that in the course of
arrangements [the fiduciary] do[es] not otherwise act in vi
tion of [his] fiduciary duties.'" Id. at 1264 (quoting Che ___ __
Indus. v. Gaffney, 449 N.E.2d 320, 326 (Mass. 1983)). Rat ______ _______
the corporate officer's duty is to refrain from "actively co
ing with his employer during the tenure of his employme
______
Chelsea Indus., 449 N.E.2d at 326.
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______________
The scope of a corporate officer's duty not to co
was outlined in Meehan, where law partners in Parker, Coul ______
Dailey & White ("Parker Coulter") planned and structure
competing law firm while still partners in Parker Coul
____________________
See Simon, 48 F.3d at 57 n.1 (court of appeals may affirm "on___ _____
ground supported in the record even if the issue was not plea
tried or otherwise referred to in the proceeding below.") (c
tions omitted).
8
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Meehan, 535 N.E.2d at 1257-59. The SJC nonetheless held______
there had been no breach of their fiduciary duty. Id. at 1 ___
The SJC further held that the fact that the defendant part
had induced Parker Coulter employees to join the breakaway
did not suffice to establish liability in the absence of "spe
ic losses resulting from this claimed breach." Id. at 1264___
At the same time, the SJC held that the defendant partn
secret solicitation of Parker Coulter's clients was an action
breach of their fiduciary duty. Id. at 1265. The latter sho ___
was not made in the instant case. There is no re
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evidence that Matteucci informed either Hanson or Nazareth of
impending move to Charles River until after Athena had_____ _____ ______ ___
dissolved and Matteucci was no longer in its employ. Moreo _________ ___ _________
there is not a scintilla of evidence supporting Brinkley C
allegation that Athena might yet have been transformed in
viable concern. On the contrary, Athena's debt exceede
assets by almost a million dollars and it had sustained ser
operating losses during its last three fiscal years. Due to
projected decline in gross income resulting from Hanson's
nounced cutbacks, Athena's future prospects were grim to say
least. Thus, Athena's vote of dissolution and Matteuc
resignation were anything but the untoward developments pos
by Brinkley Co.
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Accordingly, the district court judgment is affir ___________ ___ ________ _____ ________ __ ____
Double costs are awarded to the Looney & Grossman defen ______ _____ ___
only, pursuant to Fed. R. App. P. 38.
9