20, 2016, Filed
FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER FOR
Rosalind H. Miller, Justice
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.
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.
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.
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.
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,
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.
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.
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
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.
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
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.
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. The Ricci
Estate work was essentially private family business done by
Ricci on RCI time.
had in the past, charged the Ricci Estate for similar,
nontraditional actuarial work. 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
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."
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.
During the Shareholder Period, Charlene Eaton spent
approximately 2000 of her total " billable" time on
Ricci Estate matters. 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.
During the Shareholder Period, Quintero spent approximately
1900 of her total " billable" time on Ricci Estate
matters. 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.
During the Shareholder period, Ricci spent approximately 2300
of his total " billable" time on the Ricci Estate
matters during the Shareholder Period. 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 ...