December 10, 2015
action commenced in the Superior Court Department on February
motion to confirm an arbitration award was heard by
Patrick F. Brady, J.; a motion for attorney's
fees and costs was heard by him; and entry of separate and
final judgments was ordered by him.
Supreme Judicial Court granted an application for direct
J. Carey, Jr. ( Daniel J. Cloherty & Victoria L.
Steinberg with him) for Bruce C. Levine.
D. Hutchison ( Nancy M. Reimer with him) for the plaintiffs.
S.U. Bodoff, for Levine, Caufield, Martin & Goldberg,
P.C., was present but did not argue.
Gants, C.J., Spina, Cordy, Botsford, Duffly, Lenk, &
N.E.3d 542] Botsford, J.
central question presented in this appeal is whether parties
to a commercial arbitration agreement may alter by contract
the scope or grounds of judicial review of an arbitration
award that are set out in the Massachusetts Uniform
Arbitration Act for Commercial Disputes (MAA), G. L. c. 251.
We decide that the grounds of judicial review are limited to
those delineated in G. L. c. 251, § § 12 and 13.
defendant Bruce C. Levine and the plaintiffs Allen G. Katz,
Lawrence S. Nannis, and Jeffery D. Solomon were members of an
accounting firm known as Levine, Katz, Nannis & Solomon,
P.C. (LKNS or firm). They were each a shareholder in the
firm, and a party to a stockholder agreement dated October 1,
1998 (agreement), that governed their professional
association and relationship. [46 N.E.3d 543] In 2011,
Katz, Nannis, and Solomon, purporting to act pursuant to the
agreement, voted to require the withdrawal of Levine as a
director and stockholder in LKNS; Levine disagreed that the
termination of his stockholder interest and position was in
accordance with the agreement's terms, and the
arbitration at issue in this case concerned that dispute. We
summarize the relevant provisions of the agreement, the
parties' dispute leading to arbitration, and the
arbitration award, followed by a summary of the proceedings
in the Superior Court that led to this appeal.
agreement provides that a stockholder may withdraw
voluntarily or be required to withdraw involuntarily. Two
provisions in the agreement relate to involuntary withdrawal:
" 4(e) Involuntary Withdrawal. A Stockholder
may be required to withdraw from the Corporation, for any
reason, upon the affirmative vote of the holders of at least
75% of the issued and outstanding Shares, excluding the
Shares of the subject Stockholder.
" 4(f) For Cause Withdrawal. A Stockholder may
be required to withdraw from the Corporation for
'Cause.' 'Cause' shall
be deemed to exist upon the occurrence of any of the
" (i) Commission of an act of fraud, dishonesty or the
like involving the Corporation or any of its clients."
section 5(a)(i) of the agreement a voluntarily withdrawing
stockholder is entitled to the redemption of his shares at
" an amount equal to the accrual basis book value of the
[firm]" multiplied by the percentage of shares issued
and outstanding held by the withdrawing stockholder. Section
5(a)(i) also provides that a stockholder subject to an
involuntary withdrawal, but not " for cause," is
also generally entitled to redemption. However, section
" If the withdrawal is for Cause (as defined in Section
4[f]) or as described in Section 8(a)(iii) [i.e., where there
is involuntary withdrawal and stockholder competes with the
firm], the subject Stockholder shall forfeit his Shares ...
and the Redemption Price shall be $zero."
addition to the redemption of shares, under section 8(a)(i),
in certain circumstances, a withdrawing stockholder is
entitled to the payment of deferred compensation. However,
under section 8(a)(v), a stockholder whose withdrawal is for
cause receives no deferred compensation. In addition, under
section 8(a)(iii), if a stockholder's withdrawal is an
" involuntary withdrawal pursuant to Section 4(e)"
and the stockholder competes with the firm within three years
after his withdrawal, he receives no deferred compensation
and must compensate the firm pursuant to a stipulated
formula. A stockholder who withdraws and within three months
employs an employee of the firm also must pay liquidated
damages to the firm, under section 8(a)(vii).
13(i) provides that the agreement is to " be subject to
and governed by the laws of the Commonwealth of Massachusetts
pertaining to agreements executed in and to be performed in
the Commonwealth of Massachusetts." Section 13(j) [46
N.E.3d 544] contains an arbitration clause that provides in
" Binding Arbitration.
In the event of any dispute concerning any aspect of this
Agreement, the parties agree to submit the matter to
binding arbitration before a single arbitrator appointed by
the American Arbitration Association . ... The decision of
the arbitrator shall be final; provided, however,
solely in the event of a material, gross and flagrant error
by the arbitrator, such decision shall be subject to review
in court. ... [T]he party against which final, adverse
judgment is entered [shall be] responsible for (in addition
to its own) the other party's(ies') costs and
expenses, including reasonable attorneys' fees."
arbitration at issue here arose out of a dispute between
Levine and the other three shareholders of LKNS, relating to
work Levine had performed for a firm client, Levine's
cousin Linda Sallop and her company (collectively, Sallop).
Sallop sustained tax losses in the amount of $750,000 when
the Internal Revenue Service (IRS) refused to grant capital
gains treatment for an employee stock ownership plan in 2002
because the IRS did not receive the necessary documentation.
In 2004, Levine knew that these events created "
problems with Sallop's  tax return." In April,
2007, Sallop threatened to sue Levine and LKNS. Five months
later, Levine submitted a professional liability insurance
renewal application on behalf of the firm that did not
mention the lawsuit threatened by Sallop. Sallop sued Levine
and LKNS in September, 2008, and Levine retained counsel to
represent himself and LKNS in defending against the suit and
the threatened attachment of LKNS's assets. Levine did
not inform Katz, Nannis, or Solomon of the lawsuit, of
Levine's retention of legal counsel on behalf of the
firm, or of Sallop's motion to attach LKNS's assets
at the time that the lawsuit and motion were filed. Instead,
he did so for the first time during a stockholder meeting in
February, 2009, just before his deposition in the case. In
March, 2010, Levine informed the three that LKNS's
insurance coverage was rescinded because Levine had failed to
disclose Sallop's threatened lawsuit in a renewal
special meeting held August 10, 2011, Katz, Nannis, and
Solomon voted to terminate Levine's employment and to
remove him as an officer and director of the firm, which then
changed its name to Katz, Nannis & Solomon, P.C. (KNS).