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Kilnapp Enterprises, Inc. v. Massachusetts State Automobile Dealers Association

Appeals Court of Massachusetts, Suffolk

March 17, 2016

Kilnapp Enterprises, Inc. [1]
v.
Massachusetts State Automobile Dealers Association & others. [2]

         Argued December 7, 2015.

          Civil action commenced in the Superior Court Department on March 10, 2014.

         A motion to dismiss was heard by Judith Fabricant, J.

         Travis J. Jacobs for the plaintiff.

         Alan D. Rose, Sr., for Fisher & Phillips LLP & another.

         James F. Radke for Massachusetts State Automobile Dealers Association.

         Present: Rubin, Maldonado, & Massing, JJ.

          OPINION

          [47 N.E.3d 34] Rubin, J.

          This is an action for defamation brought by Kilnapp Enterprises, Inc., doing business as Real Clean (Real Clean), which describes itself as " a broker for automobile detailing and reconditioning between service providers and automobile dealer-

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ships." [3] Real Clean brought this action against the Massachusetts State Automobile Dealers Association (MSADA) for its published statements concerning an investigation by the United States Department of Labor (DOL) into the practices of automobile detailing " brokers" including Real Clean. The complaint not only asserts a claim for defamation but also includes several other related counts that will be described more fully below. It names as a defendant not only MSADA but also the author of the published statements, Attorney Joseph Ambash, and his law firm, Fisher & Phillips LLP. The defendants brought a motion to dismiss under Mass.R.Civ.P. 12(b)(6), 365 Mass. 754 (1974), which was allowed. Real Clean appeals.

         Because the materials properly considered by the judge in the Superior Court demonstrate that Real Clean will be unable to prove that the defendants' statements were materially false under the applicable standard, which requires demonstration that actionable statements have been made with knowledge of their falsity or in reckless disregard of their truth or falsity, we affirm the judgment dismissing all of Real Clean's claims.

          Background.

          Our review of the allowance of a motion to dismiss is de novo. Glovsky v. Roche Bros. Supermkts., Inc., 469 Mass. 752, 754, 17 N.E.3d 1026 (2014). For purposes of reviewing the allowance of a motion to dismiss we must, of course, take all the allegations in the plaintiff's operative complaint, here the amended and verified complaint filed on May 7, 2014, as true. Iannacchino v. Ford Motor Co., 451 Mass. 623, 636, 888 N.E.2d 879 (2008), citing Bell A. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). While the original complaint has seven documents appended to it, including a January 2, 2014, letter from Real Clean's counsel, Stephen Gordon, to the executive vice-president of [47 N.E.3d 35] MSADA (Gordon letter) and Ambash's response thereto, the amended complaint replaced the Gordon letter with an affidavit from Real Clean's general manager. Nevertheless, the amended complaint still appended the response to the Gordon letter and contained allegations referring to the existence of the Gordon letter. A reviewing court, like the judge initially evaluating and ruling upon a motion to dismiss, is entitled to consider materials not appended to the complaint, but referenced or relied upon in the complaint. See Harhen v. Brown, 431 Mass. 838, 839-840, 730 N.E.2d 859 (2000), citing Shaw v. Digital Equip. Corp., 82 F.3d 1194, 1220 (1st Cir. 1996);

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Marram v. Kobrick Offshore Fund, Ltd., 442 Mass. 43, 45 n.4, 809 N.E.2d 1017 (2004). We recite the facts as alleged in the complaint, supplemented by that factual information contained in these filings that were properly considered by the trial judge.

         Real Clean describes itself as a company that " connect[s]" automobile dealerships with " independent contractors" who provide automobile detailing and reconditioning services (service providers). According to the complaint, Real Clean has formed relationships with hundreds or thousands of automobile dealerships in Massachusetts and New England and is one of the largest brokers of automobile detailing and reconditioning services in the Commonwealth. In 2013, the DOL was conducting an investigation into potential violations of wage and hour laws by Real Clean and others in the automobile detailing business. The complaint and other documents properly before the judge indicate that with respect to Real Clean, the DOL investigation focused on two relationships. First, it focused on whether Real Clean in fact employed the individuals nominally employed by the service providers (detailers), and thus owed them overtime pay. Second, it focused on whether the relationships Real Clean brokered -- between the dealerships and the service providers -- in fact amounted to employment relationships between the dealerships and the detailers, and whether therefore the dealerships owed the detailers overtime pay. According to the Gordon letter, the DOL " advised Real Clean that the DOL felt that Real Clean owed many individual detailers overtime pay." According to the complaint, " [the DOL] has attempted to tie the dealership[s] to the independent contractors ... who employ the detailing and reconditioning personnel." In April, 2013, Real Clean met with the DOL and provided materials purporting to refute the DOL's conclusions. Between the time of those meetings and at least the time of the Gordon letter, no enforcement actions were brought against Real Clean. Nonetheless, according to the Gordon letter, the DOL did visit automobile dealers, including some who are Real Clean customers, and assessed amounts claimed to be due from the dealers, some of whom paid the assessment.

         In November, 2013, MSADA published a newsletter featuring an article written by defendant Ambash entitled " Alert: DOL Cracking Down on Dealers Using Real Clean." A nearly identical article appeared on MSADA's Web site on November 13, 2013, where it was entitled " DEALER ALERT: U.S. DEPARTMENT OF LABOR CONTINUES AUDITS OF AND ACTIONS

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          AGAINST DEALERS AND REAL CLEAN." The text of the first of these articles is as follows:

" We have learned that the Department of Labor has approached several dealers in the past couple of weeks and demanded payment of overtime for detailers working for Real Clean (Kilnapp Enterprises). The amounts range from a few thousand to tens of thousands of dollars. In some cases the DOL has [47 N.E.3d 36] asked the dealer to pay 'liquidated damages,' meaning a penalty equal to the total back pay owed.
" This is a serious situation for dealers who have relationships with Real Clean, and it will only get worse.
" As we have previously reported, the DOL has been visiting dealerships for months, demanding to interview dealership employees and Real Clean employees. Their primary objective has been to tie the dealerships to Real Clean, in order to claim that the dealership is a 'joint employer' of the Real Clean personnel. After the DOL completes its investigation, which typically also covers [Fair Labor Standards Act] compliance for the dealership employees, the DOL schedules a 'closing conference' and demands backpay and overtime it claims is owed both to any dealership employees who were improperly paid, as well as to employees of Real Clean.
" The dealers, of course, do not employ any of the Real Clean employees directly, nor do they supervise or control their work. Under the brokerage arrangement with Real Clean, the dealer pays a fee directly to Real Clean for detailing or reconditioning each car, and Real Clean is ...

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