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Ellicott v. American Capital Energy Inc.

United States District Court, D. Massachusetts

February 19, 2016

STEPHEN ELLICOTT, Plaintiff,
v.
AMERICAN CAPITAL ENERGY, INC., THOMAS HUNTON, and ARTHUR HENNESSEY, Defendants, and REDWOOD SOLAR DEVELOPMENT, LLC, Reach and Apply Defendant.

MEMORANDUM AND ORDER ON PLAINTIFF’S MOTION TO AMEND THE COMPLAINT AND PLAINTIFF’S MOTION FOR A REAL ESTATE ATTACHMENT AND REACH AND APPLY ORDER

F. Dennis Saylor IV United States District Judge.

This is a contract dispute between a solar energy company and a former sales employee over unpaid commissions for eight solar-installation projects. Plaintiff Stephen Ellicott has brought suit against American Capital Energy, Inc. and its two principals, Thomas Hunton and Arthur Hennessey (collectively, “ACE”). The complaint alleges claims for breach of contract and violation of the Massachusetts Wage Act, Mass. Gen. Laws ch. 149, § 148.

Ellicott has moved for an attachment of ACE’s real property in Massachusetts and a reach and apply order against certain funds owed to ACE by reach and apply defendant Redwood Solar Development, LLC. Ellicott has also moved to amend the complaint in order to add Redwood as a reach and apply defendant. Ellicott contends that ACE owes him $1.3 million in unpaid commissions according to the terms of his employment agreement, and thus seeks an attachment order and reach and apply order to secure that amount. ACE contends that Ellicott owes it $286, 391 in overdrawn advances against his commissions.

The parties have both submitted, among other evidence in support of their respective positions, expert reports by certified public accountants. Ellicott has also submitted excerpts of various depositions. After reviewing the employment agreement, the parties’ expert reports, and the other evidence, the Court concludes that Ellicott has a reasonable likelihood of prevailing on his breach of contract claim and recovering a judgment of at least $722, 266. Accordingly, the motion for a real estate attachment will be granted in part. The motion for a reach and apply order will be granted, and the motion to amend the complaint to add Redwood Solar Development, LLC as a reach and apply defendant will be granted.

I. Background

Stephen Ellicott worked for ACE as a sales employee from 2007 to 2013. (DeProspo Aff. ¶¶ 3, 7). The parties do not dispute that from 2008 to 2013, Ellicott sold eight solar-installation projects for which he now claims commissions. (Id. at ¶ 6; Ex. C at 6). Ellicott was an employee of ACE, not a partner or joint-venturer. (Id. at ¶ 21; Ex. F at 49:5-20).

On April 23, 2008, Tom Hunton, the President of ACE, signed a letter that he described as a “[c]omp plan confirmation for Steve Ellicott with American Capital Energy.” (Id. at ¶ 4; Ex. B). Among other things, ACE agreed to pay a sales commission to Ellicott of “40% of profit margin on each sale and installation to be paid within 30 days after the client pays ACE and installation is complete.” (Ex. B at ¶ 2). The letter also provided that “[t]here is a draw paid monthly at the annual rate of $120, 000.” (Id.).

ACE contends that the parties orally modified the commission rate to 30 percent in early 2011. (Id. at ¶ 11; Ex. A at 67:8-68:14). Ellicott contends that any alleged modification, if it occurred at all, did not occur until after his last sale; he notes that Hennessey, at his deposition, admitted that Ellicott was entitled to 40 percent commissions on all eight projects because they all began incurring costs before the alleged oral modification. (Id. at ¶ 13; Ex. F at 61:7-67:23).

The letter also stated that “[t]he commissions may be reasonably split with various sales support personnel by mutual agreement.” (Id. at ¶ 14; Ex. B at ¶ 2). At his deposition, Ellicott testified that he never agreed to share his commissions. (Id. at ¶ 15; Ex. D at 46:22-24). Hunton testified that ACE did not have an agreement with sales support staff to pay them portions of Ellicott’s commissions. (Id. at ¶ 18; Ex. A at 48:16-23).

In calculating Ellicott’s commissions, ACE’s auditor deducted “direct labor costs” from the gross profit margins of Ellicott’s projects; it appears that deduction was calculated as 5.6 percent of direct project costs. (Id. at ¶ 23; Ex. C at 6).

In 2013, ACE contracted with Redwood Solar Development, LLC to build solar arrays on Cape Cod and Martha’s Vineyard. (Id. at ¶ 39). On January 20, 2015, ACE brought suit against Redwood for breach of contract, alleging more than $12 million in damages. (Id. at ¶¶ 35, 39-40).

In April 2014, Ellicott filed a complaint against ACE in state court. The complaint alleges one claim for breach of contract and one claim for violation of the Massachusetts Wage Act, treble damages, attorneys’ fees, and costs pursuant to Mass. Gen. Laws ch. 149, § 148. ACE removed the action to this Court in May 2014. On December 15, 2015, after conducting discovery, Ellicott moved for an attachment of ACE’s Massachusetts real estate in the amount of $1.3 million, as well as a reach and apply order against funds allegedly owed to ACE by Redwood. Ellicott also moved to amend the complaint to narrow the scope of its pleadings and to add Redwood as a reach and apply defendant. During the hearing on Ellicott’s motions, the Court indicated that it would grant his motion to amend the complaint’s substantive allegations because he had met the Rule 16 “good cause” standard; however, the Court took under advisement his motion for a real estate attachment and reach and apply order.

II. Analysis

In order to obtain a real estate attachment under Massachusetts law, a plaintiff must demonstrate “(1) a reasonable likelihood of success on the merits and (2) a reasonable likelihood of recovering a judgment equal to or greater than the amount of the attachment sought that is (3) over and above any liability insurance shown by the defendant to be available to satisfy the judgment.”[1]Greenbriar Cos. v. Springfield Terminal Ry., 477 F.Supp.2d 314, 317 (D. Mass. 2007) (citing International Ass'n of Bridge, Structural and Ornamental Iron Workers v. Burtman Iron Works, Inc., 164 F.R.D. 305, 306-07 (D. Mass. 1995)). As to a reach and apply order against money owed to a defendant by a third party, Mass. Gen. Laws ch. 214, § 3(6) authorizes “creditors to reach and apply, in payment of a debt, any property, right, title or interest, legal or equitable, of a debtor, within or without the commonwealth . . . .” Under that statute, “the court must engage in a two-step process to establish (1) the indebtedness of the defendant [to the plaintiff] and (2) [that] the defendant has property that can be reached by the plaintiffs in satisfaction of the defendant’s debt.” Hunter v. Youthstream Media Networks, Inc., 241 F.Supp.2d 52, 57 (D. Mass. 2002) (citations omitted). “While not all contract claims must be reduced to judgment before the statutory reach and apply ...


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