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ZVI Construction Company, LLC v. Levy

Appeals Court of Massachusetts, Suffolk

October 6, 2016

FRANKLIN LEVY & another.[1]

          Heard: January 12, 2016.

         Civil action commenced in the Superior Court Department on January 28, 2013.

         A motion to dismiss, a motion to strike, and a motion to compel discovery were heard by Christine M. Roach, J.; the remaining issues were heard by Janet L. Sanders, J., on motions for summary judgment; and entry of separate and final judgment was ordered by Kenneth W. Salinger, J.

          Richard E. Briansky for the plaintiff.

          Christopher R. O'Hara (Ian J. Pinta with him) for the defendants.

          Present: Kafker, C.J., Cohen, & Blake, JJ.

          COHEN, J.

         The plaintiff, ZVI Construction Company, LLC (ZVI), brought suit against the defendants, Attorney Franklin Levy and the law firm of Lawson & Weitzen, LLP (L & W), claiming that they had engaged in misrepresentation and other wrongdoing in connection with a mediated settlement between ZVI and the defendants' clients: The Upper Crust, LLC, and its affiliated entities (collectively, The Upper Crust), and two of its principals, Brendan Higgins and Joshua Huggard. As a result of orders entered by two different Superior Court judges, all of ZVI's claims against the defendants were dismissed, and ZVI filed a notice of appeal. Despite the fact that ZVI's notice of appeal was filed before the entry of a separate and final judgment and, hence, was premature, we exercise our discretion to decide this matter. After consideration of the arguments presented, we affirm.

         1. Background.[2]

         Except where indicated, the following facts are not in dispute. Brendan Higgins, Joshua Huggard, and Jordan Tobins were members and managers of numerous limited liability companies operating a small chain of pizzerias known as The Upper Crust. On April 5, 2012, Higgins, Huggard, and The Upper Crust, all of whom were represented by Levy and his firm, L & W, filed a civil lawsuit against Tobins. In or around July, 2012, a settlement was reached in that action and documented in a memorandum of understanding (Tobins MOU). The Tobins MOU provided, inter alia, as follows:

"Tobins will pay or cause to be paid, by cash, bank check or wired funds $250, 000 to the Upper Crust, said payment to be made no later than October 1, 2012 (the 'Closing Payment') and shall be made to an account or payee as designated by the Upper Crust in writing" (emphasis supplied).

         Meanwhile, on April 6, 2012, ZVI had filed its own lawsuit against The Upper Crust, Higgins, Huggard, and Tobins, alleging that they had failed to pay ZVI for construction work performed on The Upper Crest restaurants (collection action). In the collection action, Higgins, Huggard, and The Upper Crust again were represented by Levy and L & W.

         The parties to the collection action subsequently agreed to mediate their dispute. The mediation took place on September 6, 2012, at which time all parties to the collection action, their respective legal counsel, and the mediator executed a mediation agreement that provided, in pertinent part:

"The parties further agree that the mediation, including all communications, documents and other materials, used during said mediation, including all communications between and among the parties and their counsel, shall be confidential and shall not be used for any purpose other than for said mediation" (emphasis supplied).

         Prior to the mediation, ZVI was aware that The Upper Crust had limited assets and significant debt, was under government investigation for unfair labor practices, and was dealing with significant internal management issues. ZVI also had been informed by The Upper Crust's legal counsel that The Upper Crust might file for bankruptcy. At the mediation, the parties to the collection action reached a settlement that was memorialized in a written agreement (ZVI settlement), which provided, among other things, that:

"On or before October 3, 2012, Upper Crust LLC shall pay to the plaintiff [ZVI] the sum of $250, 000, which funds are being paid by Jordan S. Tobins to Upper Crust LLC in satisfaction of his obligation under his separate memorandum of understanding with Huggard, Higgins and the Upper Crust LLC. In the event that said Tobins fails to make the $250, 000 payment, this agreement shall be null and void." (Emphasis supplied.)

         The ZVI settlement did not contain an escrow provision or otherwise call for or obligate Levy or L & W to act as escrow agents. Levy and L & W were never specifically asked, nor did they expressly agree, to act as an escrow agent for ZVI's benefit. They also were not parties or signatories to the ZVI settlement.

         In the present case, the central dispute concerns what occurred at the mediation. ZVI alleges that prior to the execution of the ZVI settlement, both Tobins and ZVI proposed that the $250, 000 due under the Tobins MOU be paid directly by Tobins to ZVI; however, according to ZVI, Levy insisted that the money be paid to The Upper Crust first and then delivered to ZVI. ZVI further alleges that, in order to induce both Tobins and ZVI to execute the settlement, Levy "represented that he would pay the funds to ZVI." ZVI claims to have executed the settlement in reliance upon this representation. Levy and L & W deny all of the above allegations.

         Approximately ten days after the mediation, on September 17, 2012, Tobins's legal counsel sent Levy an electronic mail message (e-mail), in which he set forth "a list of issues that we'll need to address, " including the following regarding the payment due under the Tobins MOU: "Payment ($250k on or before October 1 -- to you to pay ZVI)." The following day, Levy responded by e-mail and, regarding that specific issue, wrote, "I will send you my firm's escrow wire info."

         Subsequently, on Friday, September 28, 2012, an entity named Ditmars, Ltd., acting on Tobins's behalf, wired the $250, 000 due under the Tobins MOU to the Interest on Lawyers' Trust Account (IOLTA account) maintained by L & W. Upon receipt of the funds, Levy, who was in Hong Kong at the time, sent his associate at L & W, Joshua Segal, an e-mail, directing him to "make sure the money is held and we do not release it to anyone until I give directions. Especially note the money is not to be released to ZVI or [ZVI's legal counsel Richard] Briansky or anyone. Very important. Thanks." Both Levy and Segal testified that Levy was concerned about having clear written instructions from his client before the funds were released to anyone.

         The same day, September 28, 2012, Dan Hurley, The Upper Crust's chief financial officer (CFO) and accountant, sent Levy an e-mail directing as follows:

"[H]ere is how I would like the 250, 000 distributed from your IOLTA account.
"Murphy and King $64, 644.00
"Lawson and Weitzen $21, 447.28
"DiNicola, Seligson & Upton, LLP $9, 246.26
"I will make sure your office has all the wire information to make these ...

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