Richard H. Sgarzi et al. 
Sharkansky & Company LLP et al No. 134299
15, 2016, Filed
MEMORANDUM AND ORDER ON DEFENDANTS' MOTION FOR
SUMMARY JUDGMENT AND MOTION TO STRIKE REFERENCES TO PRIOR
Kenneth W. Salinger, Justice
remaining plaintiffs claim that they lost millions of dollars
they had loaned to a company called Inofin, Inc., after
relying to their detriment on allegedly false representations
that Sharkansky & Company LLP in connection with its audit of
Inofin's 2005 financial statements. Sharkansky is an
accounting firm. Defendant Scott Estabrooks is a certified
public accountant (CPA) and a partner in Sharkansky. The
third amended complaint asserts claims against both
Defendants for (1) aiding and abetting securities fraud, (2)
violating G.L.c. 93A, (3) engaging in securities fraud in
violation of federal, Massachusetts, and Colorado law, (4)
intentional fraud, (5) negligent misrepresentation, and (6)
now move for summary judgment in their favor on all claims.
In responding to Plaintiffs' opposition, Defendants also
move to strike testimony that Miriam Hollenbeck gave when
deposed by the Securities and Exchange Commission regarding
Inofin. The motion to strike is unavailing and must be denied
because Ms. Hollenbeck's testimony is admissible as
non-hearsay statements by a party's employee on a matter
within the scope of her employment, pursuant to the legal
rule summarized in Mass. Guide to Evid. § 801(d)(2)(D).
The motion for summary judgment must be allowed in part with
respect to Plaintiffs' claim for negligent
misrepresentation because the undisputed facts show that
Defendants did not owe any duty of care to Plaintiffs. This
motion must be denied with respect to the other claims,
however, because they turn on disputed facts. The record
evidence would allow a reasonable jury or judge to find at
trial that Defendants had intentionally committed, aided, or
conspired to help Inofin perpetrate actionable fraud that
caused Plaintiffs to lose the money they had loaned to
Motion to Strike Evidence
Hollenbeck was subpoenaed to testify by the SEC in connection
with its investigation of Inofin, because Hollenbeck was
employed by Sharkansky as a certified public accountant and
helped conduct its audit of Inofin and related entities.
Hollenbeck testified before the SEC under oath in June 2010.
During this lawsuit, Hollenbeck was designated by Sharkansky
as one of its Rule 30(b)(6) witnesses, and testified in that
capacity under oath on behalf of Sharkansky.
her 2010 testimony before the SEC, Ms. Hollenbeck was asked
the following questions and gave the following answers
regarding the Inofin financial statements that Sharkansky had
been asked to audit.
Q. Do you recall how Inofin intended to use these financial
A. The Massachusetts Banking Commission, they're required
to provide the financial statements to the Commission. And as
far as I know, investors who also would request a copy of the
financial statements would possibly be looking at the
Q. Was there any discussion about the impact your qualified
opinion on these two potential readers of the financial
A. I believe so, but I don't remember the specifics.
rely heavily on this testimony in opposing the summary
judgment motion, as discussed below.
assertion that Ms. Hollenbeck's SEC testimony is
inadmissible hearsay is without merit. When Ms. Hollenbeck
testified under oath before the SEC she was employed by
Sharkansky and was testifying about matters within the scope
of that employment relationship. As a result, her prior
testimony is not hearsay because it is being offered by
Plaintiffs in this action against Sharkansky " as an
admission by a party opponent" under the principles
summarized in Mass. Guide to Evid. § 801(d)(2)(D).
Commonwealth v. Keo, 467 Mass. 25, 39, 3 N.E.3d 55 &
n.20-21 (2014); accord Ruszcyk v. Secretary of Pub.
Safety, 401 Mass. 418, 422-23, 517 N.E.2d 152 (1998).
Defendants' assertion that Hollenbeck's 2010
testimony is inadmissible because she was subpoenaed and
testified before the SEC as an individual, and not as an
authorized representative of Sharkansky, is without merit.
The Supreme Judicial Court has rejected the prior common-law
rule that statements are not admissions by a party opponent
unless the declarant had " authorization to
speak " for the party, and replaced it with the
modern rule that statements by a declarant who had "
authorization to act " are admissible if they
concern matters within the scope of the declarant's
employment or other authorization to act for the party. See
Keo, supra, at 39-40 n.21, quoting Ruszcyk,
supra, at 420 n.3. It appears to be undisputed that
Hollenbeck was authorized to act on Sharkansky's behalf
in connection with its audit of Inofin's financial
statements. As a result, her testimony regarding that
assignment and work is admissible and may be considered in
connection with the pending motion for summary judgment.
Motion for Summary Judgment
claim cannot be resolved on a motion for summary judgment
where " a reasonable jury could return a verdict for the
nonmoving party." Dennis v. Kaskel, 79
Mass.App.Ct. 736, 741, 950 N.E.2d 68 (2011), quoting
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248,
106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). For this reason, in
evaluating the motion for summary judgment the Court "
must . . . draw all reasonable inferences" from the
evidence presented " in favor of the nonmoving party,
" as a jury would be free to do at trial. Godfrey v.
Globe Newspaper Co., Inc., 457 Mass. 113, 119, 928
N.E.2d 327 (2010). A request for summary judgment must be
denied where a claim turns on disputed issues of fact or on
disputed inferences from admitted facts. See 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 ...