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Stemgent, Inc. v. Orion Equity Partners

Superior Court of Massachusetts, Suffolk, Business Litigation Session

June 7, 2016

Stemgent, Inc.
v.
Orion Equity Partners et al No. 134244

          June 8, 2016, Filed

          MEMORANDUM AND ORDER DENYING CROSS MOTIONS FOR SUMMARY JUDGMENT

          Kenneth W. Salinger, Justice

         Stemgent, Inc., claims that Defendants intentionally interfered with an exclusive negotiation agreement between Stemgent and Asterand plc, and that as a result Stemgent was forced to pay Asterand a higher price for certain of assets than if Defendants had not so interfered. Stemgent also claims that the same alleged misconduct was an unfair or deceptive act or practice in violation of G.L.c. 93A.

         Both sides have moved for summary judgment in their favor on all claims. The Court concludes that the claims turn on disputed issues of material fact. It must therefore DENY the cross motions for summary judgment. Cf. Molly A. v. Commissioner of Dept. of Mental Retardation, 69 Mass.App.Ct. 267, 284, 867 N.E.2d 350 (" 2007") (" summary judgment cannot be granted if the evidence properly before the motion judge reveals a genuine issue of disputed material fact" that must be resolved at trial).

         Much of the factual background to this case appears to be undisputed. By late 2011, Asterand was in default on roughly $9 million in debt. As a result, it put two of its business units up for sale. Stemgent and defendant Mark Carthy (who said he was acting on behalf of " Orion Equity Partners") both made bids on Asterand's human tissue business. After the first round of bidding Stemgent was the highest bidder, offering $7.7 million compared to Carthy's offer of $7.6 million. As a result, Asterand signed a letter of intent with Stemgent and thereby agreed to an exclusive period of negotiation during which Asterand would only negotiate with Stemgent. Although Carthy quickly learned of Asterand's exclusive arrangement with Stemgent, he sent a new and higher offer to Asterand's board of directors. Stemgent ultimately agreed to buy and Asterand agreed to sell the tissue business for $9 million.

         Stemgent alleges that it could have purchased Asterand's tissue business for $7.7 million if Carthy had not induced Asterand to breach its exclusive negotiation agreement. It claims that Carthy and the other Defendants tortuously interfered with Stemgent's contractual and advantageous business relationship with Asterand, and thereby also breached G.L.c. 93A. To prove its tortious interference claims, Stemgent will have to establish that

(1) [it] had an advantageous relationship with a third party (e.g., a present or prospective contract or employment relationship); (2) the defendant knowingly induced a breaking of the relationship; (3) the defendant's interference with the relationship, in addition to being intentional, was improper in motive or means; and (4) the plaintiff was harmed by the defendant's actions.

Blackstone v. Cashman, 448 Mass. 255, 260, 860 N.E.2d 7 (2007). A party's " legitimate advancement of its own economic interest" is not an improper motive " for purposes of a tortious interference claim." Pembroke Country Club, Inc. v. Regency Sav. Bank, F.S.B., 62 Mass.App.Ct. 34, 39, 815 N.E.2d 241 (2004). " To demonstrate improper means, a plaintiff must prove improper conduct beyond the fact of the interference itself." Bartle v. Berry, 80 Mass.App.Ct. 372, 380, 953 N.E.2d 243 (2011). Thus, Defendants were free to compete with Stemgent and try to " pick [ ] the deal off" for themselves " if, in advancing [their] own interest, [they] refrain[ed] from employing wrongful means." Doliner v. Brown, 21 Mass.App.Ct. 692, 695, 489 N.E.2d 1036 (1986); accord Brewster Wallcovering Co. v. Blue Mountain Wallcoverings, Inc., 68 Mass.App.Ct. 582, 608-09, 864 N.E.2d 518 (2007).

         Stemgent argues that Carthy used improper means to interfere with the exclusive negotiation agreement. In particular, it asserts that Carthy made material misrepresentations in connection with its further offer to Asterand. Stemgent bears the burden of proving that the alleged misrepresentations somehow caused Asterand to breach or disregard the exclusive negotiation agreement. See Bartle, supra, at 381 (plaintiff " must show that the defendant . . . used improper means to cause" third party to withdraw or negate prior advantageous relationship with plaintiff).

         Defendants are not entitled to summary judgment in their favor. They argue that Stemgent cannot prove that any of their alleged misrepresentations had any effect on Asterand's bargaining position. But there is a disputed issue of material fact as to this point with respect to at least one of Defendants' alleged misrepresentations. The record shows that Carthy told Asterand that he was one of several " principals" acting on behalf of an entity called " Orion Equity Partners, " when in fact there was no such partnership, there were no other principals, and Carthy was acting only on his own behalf. Defendants point to deposition testimony by Asterand's chief executive officer stating that it would not have made any difference if he had known that Carthy was acting on his own. But Stemgent counters with testimony by Asterand's investment banker that if he had known that " Orion Equity Partners was simply a d/b/a through which [Carthy] was doing business" that " might well have" " created . . . concerns . . . about his ability to close a transaction." This may not be the strongest reed, but it is enough to stave off summary judgment. A reasonable jury could choose to credit this testimony and, based on it, find that Carthy had deliberately made a material misrepresentation and thereby used improper means to interfere with Stemgent's exclusive negotiation arrangement with Asterand. See generally Dennis v. Kaskel, 79 Mass.App.Ct. 736, 741, 950 N.E.2d 68 (2011) (summary judgment inappropriate where " a reasonable jury could return a verdict for the nonmoving party" (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)).

         Stemgent is not entitled to summary judgment in its favor either. At the very least, there is a disputed issue of material fact as to whether Defendants' alleged interference led to Stemgent having to pay a higher price. Stemgent argues that the evidence supports an inference in its favor on this issue. As Defendants note, however, there is contrary evidence in the record suggesting that Stemgent raised its bid because it feared that Asterand's secured creditors would walk away with the tissue business if Stemgent did not agree to pay Asterand enough money to allow it to pay off its secured debt. A reasonable jury could therefore find that the alleged interference by Defendants did not cause Stemgent to suffer any damages.

         ORDER

         Plaintiffs and Defendants' cross motions for summary judgment are both DENIED. A final pre-trial conference will ...


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