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Bryan Corp. v. Abrano

Supreme Judicial Court of Massachusetts, Suffolk

June 14, 2016

BRYAN CORPORATION
v.
BRYAN ABRANO.

          Heard: March 8, 2016.

         Civil actions commenced in the Superior Court Department on November 7, 2014, and March 13, 2015. After transfer to the business litigation session and consolidation, a motion to disqualify counsel was heard by Janet L. Sanders, J.

         The Supreme Judicial Court granted an application for direct appellate review.

          Richard J. Yurko (Douglas W. Salvesen with him) for the defendant.

          Euripides D. Dalmanieras (Caroline Stoker Donovan with him) for the plaintiff.

          Present: GANTS, C.J., SPINA, CORDY, BOTSFORD, DUFFLY, LENK, & HINES, JJ.

          CORDY, J.

         The defendant, Bryan Abrano (Bryan), appeals from a Superior Court judge's order disqualifying his attorneys, members of the firm of Yurko, Salvesen & Remz, P.C. (YSR), from representing him in a dispute against the plaintiff, Bryan Corporation (company), of which Bryan is a shareholder. The Superior Court judge granted the plaintiff's motion to disqualify on the ground that YSR's representation of Bryan violated Mass. R. Prof. C. 1.7, as appearing in 471 Mass. 1335 (2015), or in the alternative, Mass. R. Prof. C. 1.9, as appearing in 471 Mass. 1359 (2015), governing the concurrent and successive representation of clients, respectively. Because we conclude that YSR's conduct violated rule 1.7's prohibition against the simultaneous representation of adverse parties, we affirm the order of disqualification.[1]

         1. Background.

         We summarize the facts relevant to the posture of this controversy, which arises from a dispute between family members who are shareholders in a close corporation.[2] The company, which is headquartered in Woburn, was incorporated in 1985 as a close corporation and supplies pharmaceuticals and medical devices. Since October, 2008, the company has had three shareholders: Bryan; his sister, Bridget Rodrigue (Bridget); and their mother, Kim Abrano (Kim). Kim holds fifty-one per cent of the company, Bryan holds thirty-three per cent, and Bridget holds sixteen per cent. Bryan, Bridget, and Kim all obtained their shares from Frank Abrano (Frank), who founded the company, and who is Kim's estranged husband and Bryan and Bridget's father. Bryan and Bridget were directors of the company until July, 2014.[3] Bryan was the company's president and chief executive officer until 2013, when he was replaced by Libor Krupica. Bridget was the company's secretary and her husband, Dennon Rodrigue (Dennon), was the treasurer. Kim has been a director since 2008, and in July, 2014, she became the secretary and treasurer, replacing Bridget and Dennon. Frank is not a stockholder, director, or officer.[4]

         a. The Waldman action.

         In October, 2013, Waldman Biomedical Consultancy, Inc., a former consultant to the company, sued the company for over $300, 000 in alleged unpaid fees (Waldman action). In March, 2014, the company retained YSR to defend it in the Waldman action. YSR and the company executed an engagement letter that provided that YSR would handle discovery and other pretrial matters, and in the event of a trial, a YSR partner (Richard Yurko or Douglas Salvesen) and associate (Anthony Fioravanti) would try the case. The letter did not address conflicts of interest or provide that YSR could withdraw from the representation were a conflict to arise.

         YSR filed an answer on the company's behalf in April, 2014. According to YSR's bills for work in the Waldman action, from April 1 through July, 31, 2014, YSR drafted and responded to discovery requests, reviewed documents, consulted with Dennon and Bryan, and discussed various discovery matters with Waldman's counsel.

         b. Dispute over compensation.

         In late June, 2014, a dispute arose over the payment of the company's fiscal-year-end profits, with Bryan and Bridget calling for their shares of the profits to be disbursed in deductible W-2 compensation to avoid double taxation given the company's C Corporation status. Bryan has alleged that Kim, the majority shareholder and "an agent having the management of [the company], " stopped payment on the 2014 year-end profit distribution checks in violation of the Massachusetts Wage Act, G. L. c. 149, § 148 (Wage Act). Kim has alleged that she was unaware of the extent of Bryan and Bridget's compensation, and that such compensation was unauthorized by the company.

         On June 30, 2014, Bridget's husband, Dennon, contacted YSR to "discuss a different matter" from the Waldman action. The following day, Dennon had a conference telephone call with YSR attorneys Yurko and Fioravanti, as well as Bruce Garr, another lawyer for the company who is not associated with YSR. Bryan and Bridget were not on the call, but YSR has acknowledged that an attorney-client relationship was formed with Bryan, Bridget, and Dennon on July 1, 2014.[5] July 1, 2014, was also the day that Bryan and Bridget began requesting that the company issue their "year-end wage checks" to them. During the call, Yurko advised Dennon that should YSR undertake representation of one or more of Bryan, Bridget, and Dennon, a conflict of interest might arise between the company and Bryan or Bridget should they be removed from the board of directors. Yurko indicated to Dennon that, should such a conflict arise, he would withdraw from the Waldman action.

         On July, 15, 2014, Kim, Bryan, and Bridget attended a shareholders meeting to elect directors. Bryan and Bridget, who at this point were represented by YSR, did not renominate themselves to the board, instead nominating three other people. Kim nominated herself and two outside director candidates, all of whom were elected to the three-member board.

         On July 21, 2014, YSR sent a demand letter to the company's president and Kim. In the letter, Yurko indicated that he was sending the letter on behalf of Bryan and Bridget in connection with the alleged Wage Act violations and other claims. The letter also stated that Bryan and Bridget each had claims against the company and against Kim and Frank and others.[6] YSR demanded that the company "promptly address and correct these matters."

         On July 23, 2014, Yurko sent a letter to Dennon in which YSR resigned as the company's counsel in the Waldman action. The letter stated, "As I mentioned to you late last week, a conflict has developed in our continued representation of [the company] in this matter and therefore, reluctantly, we must resign from the representation." The letter further stated that there was one discovery matter that needed to be finished up, which YSR would do "with your permission." An entry from July 23, 2014, on one of YSR's bills for work on the Waldman action states: "Draft and send letter resigning from case." YSR's bills do not contain any other entries indicating that it discussed resigning with anyone from the company at any other time. On July 31, 2014, YSR withdrew as counsel from the Waldman action.

         c. The parties countersue.

         In November, 2014, Bryan, represented by YSR, and Bridget, represented by a different law firm, commenced an action against Frank and Kim, alleging claims under the Wage Act and for breach of contract and breach of fiduciary duty against Kim, and a claim for breach of the covenant of good faith and fair dealing against Frank.[7] Bryan and Bridget sought treble the amount of their "end of year compensation payments dated June 30, " which they said were based on the company's "operating profit for the fiscal year ending June 20, 2 014."

         The company was not named as a party in the action, but the complaint referred to the company as "[d]efendant Bryan Corporation" four times in the complaint. Bryan and Bridget also alleged that the company was obligated to pay the wages that formed the basis of their claims: "Bryan Abrano and Bridget Rodrigue earned substantial wages from their employment by the [c]ompany, which wages were definitely determined and had become due and payable not later than June 30, ...


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