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Segal v. Johnson

Superior Court of Massachusetts, Suffolk

June 23, 2016

Andrew Segal, M.D.
v.
H. Fisk Johnson, III et al No. 134301

          OPINION

          Paul D. Wilson, Justice

          FINDINGS OF FACT AND RULINGS OF LAW CONCERNING PLAINTIFF'S REQUEST FOR TREBLING OF A PORTION OF THE DAMAGES

         In this lawsuit, Plaintiff Andrew Segal, M.D. sued his former employer Genitrix, LLC, as well as several persons associated with Genitrix. When the case reached trial, after years of litigation in Delaware and in Massachusetts (which included trips to the appellate courts of both states), Segal's only remaining claims were his Wage Act claims against Defendants H. Fisk Johnson, III and Stephen Rose. In those claims, Segal contended that Johnson and Rose were " officers or agents having the management" of Genitrix, and therefore were personally liable to him for his unpaid wages under M.G.L.c. 149, § 148.

         I presided over an eight-day jury trial on these claims in November 2015. The jury returned a verdict in favor of Plaintiff in the total amount of $398, 892. Because the legislature amended the Wage Act as of July 12, 2008 to make treble damages mandatory, and the period of unpaid damages began before that date, the jury verdict slip asked the jury to break the damages down into amounts attributable to the period before July 12, 2008, as to which the jury awarded $231, 250, and the period July 12, 2008 and thereafter, as to which the jury awarded $167, 642.

          Prior to the amendment making treble damages mandatory, Wage Act damages were trebled if the defendant's conduct was " outrageous, because of the defendant's evil motive or his reckless indifference to the rights of others." Wiedmann v. Bradford Group, Inc., 444 Mass. 698, 710, 831 N.E.2d 304 (2005), quoting Dartt v. Browning-Ferris Industries, Inc. ( Mass. ), 427 Mass. 1, 17, 691 N.E.2d 526 (1998). Evidence of " outrageous" behavior relating to " evil motive or . . . reckless indifference" was relevant only to the trebling question, and such evidence might have unfairly prejudiced Johnson and Rose as the jury decided their liability. Therefore I bifurcated the trial, reserving to myself the obligation to decide, if necessary, whether the evidence justified trebling of pre-July 12, 2008 Wage Act damages under the Wiedmann standard.

         On December 22, 2015, without a jury, I presided over the second phase of the trial, concerning this question. The only live witness during the second phase was Segal, but the parties also introduced deposition testimony of Johnson, Rose, and David Ford, the accountant who liquidated Genitrix after being appointed for that purpose by the Delaware Chancery Court.

         At the conclusion of the evidence, I established a schedule for post-trial briefing, which contemplated that such briefing would be concluded in late January. However, the parties continued to file additional motions and briefs, most recently a sur-reply memorandum filed on June 1, 2016.

         I base my Findings of Fact and Rulings of Law on the live testimony and deposition testimony presented during both phases of the trial, as well as the 80 exhibits introduced during the two phases of the trial.

         Findings of Fact

         Based on all the credible evidence, and the reasonable inferences drawn from that evidence, I find following facts.

         In the late 1990s, Segal, a physician-scientist, was doing cancer research. He was attempting to develop a molecule that would teach the immune system to attack cancer cells. He developed some intellectual property, including patents, in this area, and he now began seeking investors to fund further development of his research. As result of a program at the Massachusetts Institute of Technology that connected scientists with investors and entrepreneurs, Segal made contact with representatives of Johnson, who was the Chief Executive Officer of a very large family company. Johnson was using some of his own money to invest as venture capital. Rose, an employee of the " family office" of the Johnson family, oversaw those investments for Johnson.

         A long negotiation ensued, in which both Segal and Johnson were represented by competent counsel. The result was the formation of Genitrix, a Delaware limited liability corporation formed by Segal and Johnson on September 11, 1997. Genitrix had other members, brought to the entity by both Segal and Johnson, but their ownership interests were small compared to the interests of Johnson and Segal. Segal contributed intellectual property to Genitrix which the parties valued at $500, 000, but no cash. Johnson contributed most or all of the initial cash capital.

         The governing body of Genitrix was the Board of Member Representatives (the " Board"). Segal and Johnson each had the right to appoint two members of the Board. Segal appointed himself as one of his representatives on the Board, and served in that role until Genitrix was dissolved. Johnson appointed himself as one of his two representatives on the Board, a position he gave up about two years later. Throughout most or all of the history of Genitrix, Rose served on the Board as one of Johnson's representatives. All parties to this lawsuit understood that Rose, who was much more active at Genitrix than Johnson, spoke for Johnson in dealing with Segal and Genitrix. In fact, Johnson so informed Segal in writing as to at least one issue.

         On the day Genitrix was formed, Segal signed an employment agreement with Genitrix, which made him the Chief Executive Officer, at an annual salary of $75, 000. (In July 2003, the Genitrix Board increased Segal's salary to $150, 000.) The agreement provided that Segal could be terminated for cause by a vote of 50 percent of the Board (that is, by the Johnson Board members alone), or without cause by a vote of 75 percent of the Board. Johnson was expressly deemed to be a third-party beneficiary ...


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