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Bournival v. Ricci Consultants, Inc.

Superior Court of Massachusetts, Norfolk

May 18, 2016

Linda Bournival
Ricci Consultants, Inc. et al. [1] No. 133922

          May 20, 2016, Filed


          Rosalind H. Miller, Justice

         This action is before the court on remand. On June 23, 2015, the Appeals Court reversed the Court's (Brady, J.) Judgment for the tefendants, Ricci Consultants, Inc. (" RCI") and Stephen J. Ricci (" Ricci") on the plaintiff Linda L. Bournival's (" Bournival") breach of fiduciary duty claim. The Appeals Court set aside the Superior Court's judgment and remanded the matter to the Superior Court for further proceedings as to the amount of damages, if any, caused by the breach of fiduciary duty.

         At trial, the court heard testimony from Ricci and Bournival, and received 172 documents in evidence. Upon consideration of such testimony as the court finds credible, the exhibits, and the arguments of counsel, the court makes the following findings of fact, rulings of law and order for entry of judgment in this matter.


         1. In October 1996 Stephen Ricci and Lynd Blatchford established RCI, an actuarial consulting firm. The core business of RCI was providing actuarial services pertaining to private pension and retirement plans. Ricci was a two-thirds majority shareholder, while Blatchford was a one-third minority shareholder. Ricci and Blatchford were the sole shareholders of RCI from 1996 until 2007.

         2. Ricci had worked for various large actuarial firms for many years. While at one of those firms, he met Linda Bournival who was also an actuary. In 2006, Bournival contacted Richie about the possibility of employment. The contact was timely because Blatchford was close to retirement and Ricci was hoping to replace him with a new partner with skill sets complementary to his. Bournival was more experienced in dealing with public sector retirement systems and there had been recent changes to state law and generally accepted accounting principles (GASB 45) that required that public pension/retirement systems be placed on a solid actuarial footing. Ricci anticipated that RCI's private company pension work would decline, as many of the companies for whom he provided consulting services had terminated their pension plans and in general private firms were now less frequently providing pension plans for their workers.

         3. Bournival became an employee of RCI in November 2006. RCI and Bournival entered into an employment agreement dated January 17, 2007. The employment agreement contemplated beginning discussion in July 2007 about Bournival becoming a shareholder in RCI. The agreement did not require any minimum number of billable hours. The agreement provided that the value of the enterprise for the purchase of shares was $450, 000.

         4. Blatchford retired. In July 2007, Bournival, after refinancing her primary residence, purchased Blatchford's one-third ownership interest in RCI for $150, 000. Ricci continued to be a two-thirds majority shareholder.

         5. From July 2007 through March 2011 (the " Shareholder Period"), Ricci and Bournival were co-shareholders. Salaries paid by RCI to Ricci and Bournival were determined by Ricci on an annual basis. During the Shareholder Period, profits of RCI were generally distributed to Ricci and Bournival on a pro rata basis according to their ownership interest: two-thirds to Ricci, one-third to Bournival.

         6. Ricci and Bournival worked reasonably well together for several years. Public sector business rose from a very small percentage to 15% of the firm's revenues by 2010. However, the relationship between Ricci and Bournival began to deteriorate. Bournival was dissatisfied with a number of aspects of the relationship. In particular, she objected to the firm carrying life insurance on the two partners, with each responsible for the premium payment on the other's life; because Ricci was much older, the premium on his policy was considerably greater than that on Bournival's life. She also objected to the fact that RCI bought Ricci a car for $20, 000, but did not provide anything for her. Bournival also objected to the firm's profit sharing formula, which allocated substantially more of the annual profits to Ricci than to her. Bournival also felt that Ricci failed to attend to client matters in a timely fashion and hindered her completion of projects because he failed to complete required peer reviews.

         7. Bournival committed her grievances to a memorandum on June 10, 2010, but did not provide the memo to Ricci. She did discuss the life insurance and profit sharing arrangements with Ricci, but he refused to alter them.

         8. In late 2010, Bournival, who billed significantly more hours than Ricci, complained to Ricci about the imbalance of hours and said that she was overwhelmed. Exhibit #16. Although Ricci promised to pitch in, he failed to do so. The court finds that the imbalance was actually more significant than Bournival knew, because Ricci's billable hours were inflated. Ricci a self-described " meticulous, overly compulsive timekeeper, " reviewed and altered Bournival's timesheets, but she did not review or alter his.

         9. Bournival consistently billed far more time than Ricci did on behalf of RCI. During the Shareholder Period, Bournival spent more than 1, 400 hours on " billable" matters (excluding Ricci Estate matters) than Ricci. Exhibit #113. Ricci suggests that the imbalance in billable hours is not relevant; it is the total time that is important. The court does not find this argument persuasive. Ricci recorded 556.75 more total hours than Bournival during the Shareholder Period. Total hours includes billable hours, " business development, " " general, " " professional development, " " office/administration, " and " NEEBC." Ricci accounted for practically every moment in the office including time spent on watering the plants, " voice, " cleaning (despite the fact that RCI employed a cleaning person), making personal appointments (Harvard Vanguard--eye appointment, Honda Village), " websites, " " Xmas, " megabucks, golf and filling out his NCAA brackets. (This is not an exhaustive list of the types of activities that Ricci accounted for under " general time" or administrative time.) Bournival did not record her time for such items.

         10. During the Shareholder Period, Ricci devoted a substantial amount of his time at RCI on work for the " Ricci Estate, " a private family trust. The work performed on behalf of the Ricci Estate included creating and maintaining a database on the RCI server to keep track of the Estate holdings, tracking stocks to be bought and sold, working with stockbrokers, drafting annual reports, and overseeing the charitable lead trust to make sure that there was cash on hand for the beneficiaries of the trust, including Ricci who received annual income from the Ricci Estate.[2] The Ricci Estate work was essentially private family business done by Ricci on RCI time.

         11. RCI had in the past, charged the Ricci Estate for similar, nontraditional actuarial work.[3] However, despite the fact that the Ricci Estate benefited from this work, RCI did not bill the Ricci Estate for work after 1998. Ricci admitted that he did not think that RCI should bill for work done for the Ricci Estate since he and his family were benefiting from that work.

         12. Ricci Estate work was classified as " billable" time on the company database, but Ricci never told Bournival that the time that he, Quintero and Eaton spent on the Ricci Estate was not being billed. Ricci's characterization of RCI's work for the Ricci Estate as " administrative, " and a reason the time was not billed is not credible. RCI performed non-actuarial administrative work for other clients, and was paid for that work. Ex. #151, 152, 153. I do not credit Ricci's testimony that he continued to record the time as " billable, " just because he was a " creature of habit."

         13. During the Shareholder Period, the Ricci Estate did not pay RCI for the services provided by Ricci or by RCI support staff, Patty Quintero and Charlene Eaton. Bournival spent no time on the Ricci Estate.

         14. During the Shareholder Period, Charlene Eaton spent approximately 2000 of her total " billable" time on Ricci Estate matters.[4] RCI paid Eaton $36 per hour and billed clients for her services at $110 per hour until 2009, and $125 per hour between 2009 and 2011. During the years that her billing rate was $110 per hour, Eaton spent 240.25 hours on the Ricci Estate. During the years that her billing rate was $125 per hour, Eaton spent 345.5 hours on the Ricci Estate. Ex #105.

         15. During the Shareholder Period, Quintero spent approximately 1900 of her total " billable" time on Ricci Estate matters.[5] RCI paid Quintero $15-$16 per hour and billed clients $70 per hour for her services. During the Shareholder Period, Quintero spent 232.5 hours on the Ricci Estate. Ex #104.

         16. During the Shareholder period, Ricci spent approximately 2300 of his total " billable" time on the Ricci Estate matters during the Shareholder Period.[6] RCI billed clients $300 per hour for Ricci's services. (Bournival was also billed at $300 an hour.) Ricci spent 913.25 hours on the Ricci Estate during the Shareholder Period. Ricci's work on the Ricci Estate slowed down his completion of ...

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